"There’s not enough time."
With the arrival of November, there are only two months left in 2019. The administration of President Rodrigo Duterte is now under severe pressure to deliver catch-up GDP (gross domestic product) growth sufficient to compensate for the growth loss occasioned by the delay in the approval of the 2019 national budget (General Appropriations Act) and the election-period ban on infrastructure spending. During the first three quarters of 2019, the Philippines grew by less than 6 percent, lower than the 6-to-7 percent growth target set by NEDA (National Economic and Development Authority).
Given the economy’s performance up to September 30 and the absorptive-capacity challenges being encountered by the Duterte administration’s BBB (Build, Build, Build) program, the nation’s economic managers have been talking lately of “at least 6 percent” GDP growth in 2019.
The downscaling by the Duterte administration of its expectations of 2019 GDP growth parallels the successive reductions in the international financial institutions’ projections of 2019 Philippine economic growth. In the latest adjustment in its projection of 2019 Philippine economic growth, the IMF (International Monetary Fund) sees the Philippine economy growing at 5.5 percent. The counterpart projections of the World Bank and the ADB (Asian Development Bank) have, likewise, lately been moving in the same direction.
The ban on government infrastructure spending within the 90-day period preceding an election clearly was a negative factor for GDP growth. Ninety days’ worth of infrastructure spending is a lot of money spent—or not spent—on goods and services for production and consumption. One is tempted to propose the scrapping of the ban until one is reminded of the corruption historically associated with the election-time award of government infrastructure contracts.
But I am unable to accept the explanation for the linkage between the delay in the 2019 General Appropriations Act’s approval and the loss of GDP during the period between January 1 and April 27, the day when President Duterte put an end to the delay. I do not claim to know everything there is to know about government budgeting; what I do know, and everyone else knows, is that the government had reenacted-budget funds at its disposal during the delay period. Realizing that there were problems—the Congressional delay and the then-looming election ban, the economic managers should have engaged in what I choose to call creative budgeting. Knowing that only P75 billion—the amount of suspected House of Representatives pork barrel insertions—was holding up President Duterte’s approval of the P3.67 trillion 2019 national budget for 2019—the economic managers could have front-loaded much infrastructure spending to the first months of the year instead of merely waiting for the presidential approval to happen. I’m a firm believer in the statement that there are many ways—legal ways—of skinning a cat; the economic managers apparently are not.
What has happened, instead, has been a bunching up, in catch-up fashion, of BBB spending, during the months following April. Catch-up spending usually is neither conducive to efficient use of capital nor unattended by absorptive-capacity problems.
And so I go back to the question I impliedly posed at the beginning of this column. Is the government likely to be able, during the next two months, to do catch-up spending sufficient to generate 2019 GDP growth of “at least 6 percent”? Considering that as of September 30, fully 96 percent of the full-year national budget has been released—as per a recent DBM (Department of Budget and Management) report—there would seem to be a slim chance of a vigorous growth spurt during the next two months.
Two months is insufficient time for such a spurt.