The P72-billion stimulus: It’s too late

Last of two parts

Ric Saludo’s colleague Verbo Bonilla contributed this column.

If the P72-billion stimulus package could go some way to addressing government under-spending, other factors slowing GDP growth are tougher to cover. Aside from delays in public spending, the key immediate concerns,according to NEDA headPaderanga, are “weak industry output, and timely recovery from natural calamities.”

The economic planning secretary expects agriculture, manufacturing, services and trade, among others, to have a strong showing in the last semester of the year. Of course, Paderanga says, “public construction and government services are likely to pick-up due to the accelerated spending plan of government implementing agencies.”

Recent developments may douse this optimism. A string of typhoons haswrought havoc on agricultural production, with estimatedagricultural damage due to typhoonsPedring and Quiel at P12 billion, including P11 billion in rice. According to Agriculture Secretary Proceso Alcala, the series of typhoons disrupted what “could have been the year that the country posted its highest-ever palay yield on record.”

Philippine manufacturing growth, on the other hand,has steadily been declining in recent months, with the latestMonthly Integrated Survey of Selected Industries showing just 2.6 percent growth in August compared to 4.6 percent in July.In a comment emailed to media,Prof. Diokno opined: “The deterioration in recent months suggests a poor third-quarter performance for manufacturing… consistent with the depressing electronics exports performance and serious government underspending.”

As for trade, preliminary datacoming in are also hardly encouraging. External trade performance for August, as reported by the National Statistics Office, shows value of exportsdecreasing slightly from $4.77 billion in August last year to $4.12 billion in the same month this year, with imports managing to increase also slightly. All told,the balance of trade in goods for the Philippines posted a higher deficit (negative) of $7.118 billion for the first eight-month period of 2011, a value higher than the $2.505 billion deficit recorded during the same period in 2010.

More alarmingly, the latest figures only validate the continuing decline in exports since September 2010, amid the global economic slowdown. And therehas beenno sign of the downward trendreversing anytime soon.

As for services, this sector is the only really bright spot for the economy coming into the second half of the year.Updated data on the sector is as yet unavailable, but services’ output historically perks up in the latter months of the year. We can only hope that the increase will be abnormally higher than in the same period a year ago.

What about public construction and government services? Withearlier pronouncements to accelerate spending, state disbursementsshould have ramped upin the third quarter. But the latest government reportsays otherwise.

DBM’sNational Government Disbursement Performance in September showsa mere P5.5 billion or 1.5 percent increase in third-quarter disbursement over the same period a year ago, despite the double-digit in this year’s budget. Discounted for inflation of about 4,5 percent, moreover, real expenditure actually declined by 3 percent, pulling down overall economic growth.
Indeed, thegovernment has again fallen short of its disbursement program in the July-September quarter by P65.4 billion below the programmed P436.6 billion. Prof. Diokno, pointed out that this represents underspending by as much as P195 billion — P847 billion versus P1.04 trillion, net of debt payments—from January to September 2011.

Of course, hiking government spending is not as simple as just issuing checks. It involves the implementation of programs and projects meant to enhance public welfare. These shouldn’t be just about any program or project, as well, but those that lay the foundation for lastingdevelopment.If anything, the continuous underspending of government, in the face of avowal to spend more, indicates an inability to execute and carry out those activities government has set itself to accomplish.

In times of global recession, the government is expected to take up the slack in economic activity. Now, the Aquino Administration has announced a stimulus package, after three straight quarters of underspending. Coming at this time of the year, it is all but too late to make an impact in our 2011 GDP figures.

In typical fashion, the Aquino government is still unable to disclose the list of projects under its stimulus package. In response to a proposal to further add P20 billion to the package, Prof.
Monsod asked, “If the government cannot even come up with a detailed list of “stimulus” projects that add up to P72 billion (or share it with the public), how can it possibly even think of adding P20 billion more to this “stimulus”?

With the way things are going, even 5 percent growth may be a stretch this year. And it didn’t have to be this way if the government had just spent the budget it stampeded through Congress last year. –Ricardo Saludo, Manila Standard Today

(The first part was published on Wednesday.)

Verbo Bonilla (MPM National University of Singapore/Harvard) is senior analyst with Center for Strategy, Enterprise & Intelligence, which publishes The CenSEI Report ( report@censeisolutions.com).