Overdose of politics, underspending blamed for dismal 3.7% 2011 growth

The economy turned in a weak 3.7 percent growth for the entire of last year from a 7.6 percent expansion the previous year mainly as a result of sluggish activities in the last two quarters when President Aquino was hotly pursuing his political adversaries former President Gloria Arroyo and Chief Justice Renato Corona instead of focusing on stimulating the economy through increased government spending.

Even the head of the National Statistical Coordination Board (NSCB) acknowledged that the “feeble” growth rate was the result of government underspending on infrastructure in the second and third quarters of last year that placed a damper on the growth momentum until the end of the year.

Aquino has been chiefly criticized for focusing too much on running after his perceived political enemies and that such efforts are at the same time smokescreens for his failures in governance.

Economist and former budget secretary Benjamin Diokno expressed worries that the downward momentum may be hard to reverse. “A robust public construction may not be enough to engineer a strong rebound for the economy this year,” Diokno said.

Government projects account for a fourth of total construction but private construction which accounts for the rest had slowed significantly during the last three quarters as a result of low government infrastructure spending.

First Grade Holdings managing director Astro del Castillo said the growth figure was disappointing given that the government was supposed to be prepared for a crisis.

“Hopefully, the first quarter of this year will be a better quarter. The question now is the ability of the government to lift the wings of the economy,” he said.

Despite the crisis from both the United States and the Eurozone will continue to affect growth, the government should be ready to employ buffer measures and that the local political events currently happening will not take the entire attention of the government, he said.

However growth of 3.7 percent in the final three months of 2011 was up from 3.6 percent in the previous quarter, showing the economy was at least slightly accelerating and offering hope that state pump-priming efforts were kicking in.

“Overall, we expect the economy will be able to regain its momentum this year,” Economic Planning Secretary Cayetano Paderanga told reporters.

“We expect that this acceleration of public expenditures will continue well into 2012 and beyond.”

Paderanga said the government was sticking to its forecast for economic growth this year of 5-6 percent.

The government sharply restricted state spending last year supposedly as part of a high-profile anti-graft campaign, seeking to ensure all government contracts were free of corruption before releasing money.

However he came under some criticism for putting the brakes on the economy as major trading partners the United States, the European Union and Japan suffered from a range of economic woes.

Paderanga pointed to the financial crisis in Europe, as well as sluggish growth in the United States, as continued major threats to the Philippine economy.

But he said the government, having implemented its anti-corruption reforms, should be able to cushion the domestic economy from external problems by injecting more money into infrastructure projects as well as social services.

“We can now spend every taxpayer peso with full efficiency and high impact on the economy,” he said.

Budget Secretary Florencio Abad told AFP a contraction in infrastructure spending had hurt growth in the first three quarters, but stressed this was offset by huge capital outlays in the final three months of the year.

He also noted that the government had this month already released 72.1 percent of the P150 billion earmarked for infrastructure spending for 2012.

“So it is fair to say that we will have higher spending in the first quarter of this year, providing momentum,” Abad said.

Investors remain “cautiously optimistic” of the government’s economic forecast and promised spending, according to Jonathan Ravales, chief strategist at BDO Securities.

“Our forecast (for economic growth) this year is 4.5 percent, but this hinges on whether we will see a better growth figure in the first quarter,” he told AFP.

“It remains to be seen whether the government will plant the seeds of spending today to carry the economic engine going forward.

“Other factors also need to be considered, including the growing uncertainly outside our shores,” he said.

Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr. said that “with the accelerated spending program now on under the new governance procedures, the government should derive more bang for each buck that is spent.”

He was referring to the P72.1 billion accelerated spending program of the Aquino administration implemented starting last October.

As of end-December last year, actual disbursement for the accelerated spending program totaled to P53.8 billion while 96 percent, or P69.3 billion of the P72.1 billion have been released to the various government agencies and departments.

The Aquino government has increased by P13.4 billion the accelerated spending program after pooling savings from completed or discontinued projects last year.

As of Dec. 29, 2011, releases from the additional accelerated spending budget totaled P11 billion while actual disbursement totaled to P7.6 billion.

Tetangco said they would continue to monitor developments overseas and its impact on domestic situation.

“The BSP will assess the growth prospects of our major trading partners and their impact on our own domestic growth and inflation dynamics,” he said.

Last Jan. 19, central bank’s policy-making Monetary Board (MB) slashed by 25 basis points BSP’s policy rates to boost economic growth given the benign inflation outlook.

To date, central banks overnight borrowing rate to 4.25 percent and the overnight lending rate to 6.25 percent.

The rate cut was the first since July 2009 and was done after the Board maintained the rates in the past six consecutive policy meetings.

Inflation target for this year until 2013 is a range between three and five percent.

The central bank chief said “pressures on global commodity prices are seen to continue to abate amid weaker global growth prospects.” –Danessa O. Rivera, Daily Tribune