Citi Research said government spending on the Yolanda rehabilitation and reconstruction efforts from 2014 until 2016 could boost the economic output by 2.2 percent.
In its “Emerging Markets Macro and Strategy Outlook,” Citi Research said it sees subdued risk of fiscal underspending prospects from the fourth quarter of 2014 with government having approved and started implementation of the P170.9 billion budget for the rehabilitation and reconstruction efforts in Yolanda-affected areas over 2014 to 2016.
The report noted that the total budget consists of P35.1 billion infrastructure budget, P26.4 billion social services program, P75.7 billion resettlement budget, and livelihood projects worth P33.7 billion.
Meanwhile, the government claims to have spent P37.4 billion under the recovery program, it added.
Citi Research pointed out that with the P170.9 billion total budget for the three-year period, the average annual fiscal expenditures devoted to the rehabilitation program are P57 billion, largely coming from non-infrastructure components or at least 2 percent of annual budget.
“Using 2006 I/O table, annual fiscal spending of P57 billion under Yolanda rehab program could increase output by 0.74 percent assuming no implementation slippage: On a three-year cumulative basis, we can be assured of 2.2 percent additional growth,” it said.
The think tank said it estimated a 1.65x multiplier from potential income of P94.3 billion for annual fiscal spend of P57 billion.
“Fiscal spending multiplier effects would be ‘internalized,’ benefiting domestic market-oriented industries,” it added.
Citi Research noted that public administration and other government services probably expanded the most as the main beneficiaries of the rehabilitation program with an additional P49 billion or an increase of12.8 percent.
Construction sector chalked up a 2.2 percent gain mainly coming from planned infra component.
It also mentioned potential gains from higher fiscal spending incurred by other services: transport, storage and communications with 0.4 percent; financial intermediation with 0.85 percent; and real estate, renting and business services with 0.38 percent, exceeding possible manufacturing upside of 0.24 percent.