President Rodrigo Duterte, who professed early on in his presidency that he knows little about economics compared to his past two predecessors who hold university degrees in that field, is proving to have an administration that excels in fiscal management.
Infrastructure spending surged to 6.3 percent of gross domestic product (GDP) in 2017 and is estimated to hit 6.2 percent of GDP in 2018, triple the average of 2 percent of GDP spent from 1986 to 2016.
The Duterte administration targets increasing infrastructure spending to more than 7 percent of GDP by 2022.
Comparing the maiden two years of his predecessors, Mr. Duterte had shown a much better job than his peers.
The fast-tracked spending performance under the President’s watch addressed the country’s underinvestment in infrastructure which was a severe drag on the performance of the economy.
Infrastructure spending in terms of its share on GDP ranked highest among administrations after the downfall of former President Ferdinand Marcos in 1986.
Data from the Department of Budget and Management (DBM) also showed Mr. Duterte doubled the 3 percent of GDP spending of the previous administration.
Also, the accelerated infrastructure spending proved to be significantly higher than his predecessors’ performance as the administrations under Fidel Ramos, Joseph Estrada and Gloria Macapagal-Arroyo posted just 1.7 percent, 1.8 percent and 1.6 percent of GDP, respectively.
“Unlike other administrations, we started…full blast, no slack, because the other administrations took a year or two before they were able to pick up,” Budget Secretary Benjamin Diokno explained.
Meanwhile, despite the assumed wider fiscal gap in the 2019 national budget, Fitch Solutions perceived a lower than 3 percent average deficit under Mr. Duterte administration’s 3.2 percent target.
“The government is likely to underspend its budget in 2019, but slower-than-expected revenue growth means that the deficit will still come in at close to 3 percent,” Fitch said.
“Downside risks to macroeconomic stability are rising as a result of loose and monetary policies, although the Philippines remains on good standing for now,” it added.
In addition, the economic think tank expects the country’s deficit to remain on the upside as the government remains committed in its expansionary fiscal agenda.
According to latest data on government disbursements, infrastructure also remains one of the primary spending drivers as of November 2018.
Year-to-date actual disbursements also stand at P3.1 trillion, increasing the likelihood of zero underspending for 2018, DBM said.
Neglect of the past
Years of past neglect through meager spending and fiscal conservatism has resulted in substandard infrastructure and poor quality of life. Not surprisingly, the Philippines lags behind its peers in the Association of Southeast Asian Nations in terms of the quality of its overall infrastructure. The Philippines’ overall infrastructure rank has sharply fallen from 94th in 2009 to 112th in 2017.
With subpar road networks and transport systems, traffic congestion in Metro Manila alone costs as high as P3.5 billion daily, according to recent Japan International Cooperation Agency estimates. This does not even reflect the cost to the health and well-being of commuters.
With the “Build, Build, Build” program in full swing, infrastructure outlays are expected to increase from 4.7 of GDP in 2019 to 7 percent in 2022. So far, 44 out of the 75 major projects have already begun implementation.
And this year, the P356 billion Metro Manila Subway Project, the first-ever subway system in the country, will commence construction.