Gov't underspending, global woes slow down economy to only 5%

Underspending in public infrastructure, along with global economic slowdown, dragged the country's economy which is estimated to grow by only 5% this year from last year's 7.6%, according to  the National Economic and Development Authority (NEDA). In a year-end media briefing Thursday, Socio-Economic Planning Secretary Cayetano Paderanga Jr, also NEDA director general, said the impact of low public infrastructure spending on the country's gross domestic product (GDP) is about 0.5 percentage points. He said the economic slack from lower government spending was brought about by improved processing of public contruction projects, as well as by uncertainties in Europe, weak US economy and disasters in Japan which led to low exports. However, Paderanga said the government reined in public spending, resulting in lower budget deficit, and improved project processes to discourage corrupt practices and save money. “Now, no money is released to an agency without a program of work,” he said. A public works project, for example, details the schedules of work and the costs. He said this is different from the previous administration's process of submitting a project proposal first for funding, then the project's program of work follows. This, the Aquino government feels, provides opportunities for corruption. Paderanga said some of the reviewed public construction projects have yielded savings for the government. He said, for example, one agency project was estimated to cost P32 billion. But when it was reviewed, its cost was reduced to about P30 billion and it was eventually bid out for only P26 billion. “This whole underspending has had real savings for the government,” he said. “As of September 2011, the government spent at least P200 billion, 25% or P50 billion was savings.” Public-private partnerships This year the government failed to implement most of the planned public-private partnership projects and the P72-billion Disbursement Acceleration Program or the stimulus program. Only one project was offered for bidding and P43.4 billion or 60.2% of the P72 billion was allocated by the Department of Budget and Management. But the impact of these projects on the economy will be felt next year when the government aims for 5%-6% growth. “We feel we will do better next year. Our prospects in the near-term are positive,” said Paderanga. “Public construction and government consumption and services will pick up in the coming quarters because of quick releases and faster utilization of the stimulus program,” he said. Businessmen said earlier the government must immediately implement infrastructure projects such as roads, seaports and airports to help improve the investment environment and must improve doing business, governance, tourism and education. Paderanga said the slow growth in the first three quarters would be buoyed by holiday spending, increased business and consumer confidence and a more stable macroeconomy in the last quarter. He added that this growth would be backed by the services sector, particularly real estate, agriculture because of the food self-sufficiency program and private consumption owing to increased spending of households on food and utilities. “Spending will be supported by broadly stable prices of commodities and consumer sentiment indicates more optimism in 2012,” he said. New jobs Paderanga also said the government created 2.1 million jobs as of October this year from 1 million jobs  in the same month last year. This reduced unemployment rate to 6.4% from 7.1%. The economy grew by 3.6% in the year's first three quarters compared to 8.2% of the same period last year. This was lower than the economic performance of China, Indonesia, Vietnam, Singapore and Malaysia. Multilateral financial institutions like the World Bank (WB) and the Asian Development Bank (ADB) have forecast a sluggish economic performance of the Philippines this year. The WB estimates growth at 4.2%  while the ADB sees the economy growing by only 3.7% Both think the country can sustain growth through improved fiscal position and strong overseas workers' remittances, but risks remain like global uncertainties and slow inflow of investments. - OMG/ELR/KG, GMA News