Why state spending is slow

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Due to the writer’s business, publishing and event commitments, this column took last week off, and would be somewhat shorter than usual this week. Still, the big issues would be given trenchant, if succinct attention.

Today, we look at the economy, the paramount issue affecting the lives of Filipinos now. It slowed in the first quarter to 5.3 percent growth from a year ago — the lowest percentage increase in gross domestic product since 2011.

That year. government underspending cut GDP growth by more than half to 3.7 percent, from 7.6 percent in 2010, as reported by the Asian Development Bank. For the first time ever, public construction fell by half in the first semester.

Now, delays in spending and implementing budgeted outlays again slowed the economy. The magnitude of underspending was nearly 1.5 percent of GDP, judging from the drop in the budget deficit to 0.6 percent of GDP from the targeted 2 percent.


That means the state failed to spend the equivalent of 1.4 percent of GDP, and perhaps even more, since tax revenue growth was curtailed by lower prices of imported oil and added a bit to the deficit figure.

Therefore, if the Aquino administration had addressed its chronic underspending problem and spent the full January-March budget, that would have bumped up economic expansion the 6-7 percent widely expected by economists.

Unlike the 2011 slowdown, there are no excuses this time claiming that a purported clampdown on anomalies in state contracts of the last administration delayed infrastructure rollout. (Many doubted that reason, since no one was sanctioned for the supposed irregularities.)

All that Economic Planning Secretary Arsenio Balisacan could say is that disbursements would accelerate in succeeding quarters, bumping up growth. What he knows but declined to say is that the economic boost for the year expected from first-quarter spending are gone.

How did a government that even concocted the illegal P150-billion Disbursement Acceleration Program in its drive to speed up spending, fall behind in pumping out the cash? One would suppose that after the 2011 rollout delays, which themselves led to the DAP initiative, the Palace would crack the whip on non-performing agencies.

In fact, underspending remained a problem even in 2012-14. Government outlays contributed less than 1 percentage point of annual economic growth in those years. That contrasts with the rapid implementation by the 2001-10 Arroyo government, when budget utilization exceeded 90 percent, up from the historic average of 85 percent.

So why is the Aquino administration slow in spending the state resources that its commendable tax drive and the Arroyo-era fiscal reforms have raised to unprecedented levels? Among the reasons has to be one three-letter word: OIC.

In many national agencies and all across the bureaucracy, key positions have been unfilled for many months, leaving officers-in-charge holding place but not empowered to do much else.

This OIC proliferation got headlined over the Mamasapano massacre, when the controversy over the killing of 44 police commandos in the Maguindanao area highlighted the status of then Philippine National Police Officer-in-Charge Leonardo Espina.

As PNP OIC, Espina lacked the authority to appoint or transfer personnel. Nor could he approve spending above a certain amount. Amid the brouhaha over Mamasapano, the Palace upgraded Espina to Acting PNP Chief, expanding his powers.

But dozens of posts up and down the government are still under OICs, including more than 50 in the PNP.

Besides the PNP, other major agencies are still lacking full-fledged heads, including the Department of Energy and the Civil Service Commission. And only in the past month or so were the Commission on Elections and the Commission on Audit chairmen named.

Like Espina before he was appointed Acting PNP Chief, OICs in the bureaucracy are limited in hiring and spending. No prizes for guessing what that would to do the pace of utilizing state funds, both for budgeted projects and for plantilla positions.

The solution is also a no-brainer: President Benigno Aquino 3rd and other appointing authorities must clear the appointment papers piling up on their desks, and fill the plethora of vacant positions in the bureaucracy.

Two days ago, Malacañang announced several appointments, including a couple of foreign postings and some positions in minor agencies and state firms. That molasses flow of naming officials will not dent the underspending much.

President Aquino must fill the top posts of major entities ASAP. Otherwise, not even the faster budget disbursements expected by Secretary Balisacan would actually translate into spending that boosts his GDP data.

Get that appointment pen working, Mr. President. The economy and public services depend on it.

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3 Comments

  1. right, appoint the right manager in the govt. with full authority and accountability. encourage to implement small project projects costing below 5.0 million to use labor based-equipment support to maximize the use of labor, thus more money will be transfferred to the consumer/buyer of goods and services.

  2. Surely any country that just or mainly depends on government spending to sustain growth will eventually lead to a bankrupt country. Ive not the best at economics but i would say my statement is fundamental for any country. I may be wrong & if so i stand corrected but as from what i understand ( & it is a small amount in this sector ) it seems common sense that you need the country to produce the majority of the wealth of the country not the government.
    So where the government can help is in giving incentives to companies to help or encourage them to expand in this country & to re invest in this country & not choose other countries.

    • sonny dela cruz on

      I may disagree with you on government spending to sustain growth will eventually lead to a bankrupt country. If your spending is to create jobs for the people then you will arrived on a stable economy because the money spent just go back to the government. Now, if your spending for IMPORT IS ALWAYS LARGER THAN EXPORT, then you are in trouble. Another thing is when your spending goes to the pockets and nothing is produced, that’s another scenario that you may go bankrupt. That’s why if your government is corrupt, you’ll never have any progress at all and end up to collapse. That’s my theory.