Infrastructure spending picks up

The government is expected to ramp up infrastructure spending to boost the economy’s recovery. — PHILIPPINE STAR/ MICHAEL VARCAS

GOVERNMENT SPENDING on infrastructure snapped a six-month losing streak in February after the implementation of projects under the second stimulus package gained traction, the Department of Budget and Management (DBM) reported on Monday.

Latest DBM data showed infrastructure and other capital outlays jumped by 23.1% year on year to P56.1 billion in February. This was also 9.4% higher than the P51.3 billion spent in January.

This brought total infrastructure spending to P107.4 billion for the two months, 14.4% higher than the same period a year ago.

Infrastructure spending had been on a steady decline throughout the second half of 2020, when the government slashed budgets to fund its pandemic response.

The DBM attributed the bigger spending to payments made by the Department of Public Works and Highways (DPWH) for completed infrastructure projects that started last year as well as the mobilization costs for projects such as road widening, rehabilitation and flood control, that will be rolled out this year.

It was also boosted by the release of infrastructure funds under Republic Act No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II), the second stimulus package of the government that began last year but was extended until June so unspent funds could be used.

“The construction of farm-to-market roads of the Department of Agriculture under Bayanihan II, as well as payables related to the provision of farm machineries and equipment (e.g., tillers, tractors, seeders, threshers, rice planters, harvesters) to qualified farmer organizations as provided in RA No. 11203 or the Rice Tariffication Law also contributed to the higher infrastructure and other capital expenditures,” the DBM said.

Economic managers touted infrastructure spending as one of the biggest stimulus measures to help drive recovery. They also assured that funding for “Build, Build, Build” projects would not be affected by budget cuts this year.

The government allocated P1.2 trillion for infrastructure projects this year to fuel economic growth and help complete big-ticket projects before the Duterte administration ends its term by mid-2022.

“In terms of disbursements, spending is expected to further pick up in March given the trend of increasing expenditures towards the third month of the quarter before the validity of cash allocations end,” the DBM said.

The government is expected to increase spending for infrastructure projects during the dry season.

Other programs that will support state spending this quarter include the implementation of other Bayanihan II projects and the payment of the P23-billion cash aid to low-income households affected by the March 29-April 11 strict lockdown in Metro Manila and nearby provinces.

Budget for projects under Bayanihan II mainly propped up infrastructure spending in the first two months of the year, said ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa.

However, Mr. Mapa said the uptick is unlikely to be sustained and might drop in the coming months given the high base last year, the government’s belt-tightening plans and the lack of a third stimulus package.

“Overall, we expect only a modest pickup in government spending in 2021 given fiscal austerity with bouts of ECQ (enhanced community quarantine) thwarting construction efforts which would lead to delayed spending,” he added.

Robert Dan J. Roces, chief economist at Security Bank Corp., said infrastructure spending would remain a key growth driver this year with its huge multiplier effects through job creation and a boost in imports and other related industries.

“The early infrastructure spending bodes well for a recovering economy, but sustainability will be something to watch out for as uncertainties in the pandemic could weigh on momentum, with on-again/off-again lockdowns looming, especially in the second half when it is expected that the larger infra spending will take place,” Mr. Roces said in an e-mail. — Beatrice M. Laforga