THE government’s infrastructure program faces further delays due to the quarantines imposed by the coronavirus disease 2019 (COVID-19) outbreak, as well as the repurposing of funds to contain the pandemic, according to Oxford Economics.
In a research note Thursday, it said the government’s original 7% economic growth target will require an increase in the project implementation rate of at least 50% from the current 30% “before infrastructure spending provides the necessary boost,” with weak private investment expected to further dampen overall investment.
“Boosting growth via increased infrastructure spending is a priority for the Philippine and Indonesian governments, but progress has been slow in both. For the Philippines, a key issue is the limited capacity of major government departments to fully implement their allocated infrastructure budgets,” it said.
Oxford Economics noted that progress in infrastructure projects “has been slow” despite the P8-trillion spending plan for the flagship infrastructure program.
It said this “is likely to be hurt further by the coronavirus outbreak this year” despite government’s efforts to continue with the projects since the government budget is expected to prioritize programs geared at containing the pandemInfrastructureic, boost health care and cushion the economic fallout.
According to its Global Economic Model, Oxford Economics estimated that infrastructure spending accounted for 1.2 percentage points of gross domestic product (GDP) growth over 2017-2019, using an investment multiplier of 0.85%.
“Nonetheless, we expect public capex to pick up as normalcy is gradually restored. Although falling short of the governments’ targets, we expect infrastructure spending to remain a key fuel for growth in both countries over the medium term,” it said.
It said spending by the major infrastructure-implementing agencies, the Departments of Public Works and Highways (DPWH) and Transportation (DoTr), increased at average rates of 34.9% and 6.1%, respectively, over the 2016-2018 period.
However, it said higher budgets have “kept average implementation rates for both departments relatively stagnant at 34.2% and 12.5%, respectively,” or an estimated weighted average implementation rate of 30% for the two agencies.
“Although both departments are spending more, their absorptive capacity hasn’t kept up with the rapidly rising budgeted amounts, resulting in stagnant implementation rates,” it said.
The Luzon-wide lockdown, which was extended until April 30, limited movement to essential workers and shipments only, suspended public transportation and halted non-essential business operations.
Work on many public infrastructure projects was also stopped in Luzon due to the lockdown, while 13 rail projects were allowed to carry on with limited work. — Beatrice M. Laforga