Bullish on growth

CONSUMPTION and infrastructure spending can sustain the country’s stellar growth well into next year, economic managers claimed.

Given the momentum from three straight quarters, and with the July to September period particularly surpassing expectations, Budget Secretary Florencio B. Abad said the outlook for the rest of the year was bright and would extend to 2013.

“The third quarter has traditionally been a slow-growth quarter while the fourth quarter is a high-growth quarter,” Mr. Abad said in a text message.

The economy grew by 7.1% in the third quarter, surpassing both market projections and the official 5-6% goal for 2012.

“This is due to the acceleration of public spending as government agencies became aware of savings available for priority projects,” Mr. Abad claimed.

Public spending contributed significantly to the third-quarter surge — by expenditure share, the sector expanded the fastest at 12%. Household consumption and capital formation followed at 6.2% and 4.3%, respectively. A strong infrastructure bias was evident, with construction investments — part of capital formation — soaring by 24.8%.

“Next year, we expect the growth to continue because of the procurement reforms we adopted that will save us three to four months in project implementation, on top of being able to execute in the flood-free, typhoon-free first semester,” Mr. Abad said.

The Budget department has streamlined procurement processes so that 2013 infrastructure projects could be bid out as early as last month by agencies, allowing them to award contracts by January and maximizing construction in the dry season.

Public spending should also be boosted by an increase in infrastructure projects covered by the 2013 national budget as well as the continued rollout of the public-private partnership program, Mr. Abad said.

Consumption — another consistent driver of economic growth — should likewise remain robust, the Budget chief said. With the holidays fast approaching, spending will provide a yearend boost. Next year’s midterm elections will also buoy the economy.

“Election years show [a] spike in growth due to extraordinary business and spending activities usually accompanying polls,” Mr. Abad explained.

Economic growth hit a record high of 7.6% in 2010, an election year.

With year-to-date growth already at 6.5%, economic managers expect the economy to finish anywhere between 6-7% this year. The same growth path is programmed for 2013.

To sustain this trajectory, Socioeconomic Planning Secretary Arsenio M. Balisacan said the government would focus on macroeconomic fundamentals.

“We will keep on putting our house in order,” he said in a chance interview.

The country has benefitted from low and stable inflation, which settled at 3.18% in October, well within the central bank target of 3-5% for the year. The fiscal deficit has also been manageable at P115.74 billion, not even half of the P279.1-billion full-year cap.

Finance Secretary Cesar V. Purisima, meanwhile, identified other untapped sectors that could give the Philippines “extra gears” for growth.

“[M]ining represents an extra gear for the Philippine economy once the regulatory environment is rationalized,” he said in a statement last week.

A moratorium on new mineral agreements remains in effect and its lifting is hinged on Congress’ passing a law rationalizing existing revenue-sharing schemes. Given a lack of time, legislators said it was likely up to the next Congress to craft the law.

Mr. Purisima, meanwhile, added that peace in Mindanao also represented another growth opportunity.

“The peace agreement once completed and fully implemented represents another extra gear that will unlock the significant potential of Mindanao,” he said.

The government and Moro Islamic Liberation Front, after signing a framework agreement last month, are hammering out a final peace deal that both aim to ink before the year ends. –Diane Claire J. Jiao, Senior Reporter, Businessworld