Infrastructure spending continues to fall in Sept.

STATE SPENDING on infrastructure plunged by 40% in September — the third straight month of decline — amid budget cuts and delays in construction activities due to ongoing quarantine restrictions.

Despite the decline, the Department of Budget and Management (DBM) said in a statement that government agencies reached the third-quarter spending target which was already reduced as the government tightened its belt due to the pandemic.

Infrastructure and other capital outlays slid 40% to P56.9 billion in September from P94.7 billion logged a year ago. This was the fastest decline in 17 months or since the 56.9% decline seen in April of 2019.

Month on month, infrastructure spending in September was up 28.6% from the P44.3 billion spent in August.

Infrastructure spending has been on a decline since July.

“It is noted that infrastructure spending is expected to be lower with the discontinuance of some capital outlay projects which are unlikely to be completed nor implemented this year due to the pandemic,” the DBM said.

This year’s budget for infrastructure projects was cut by 20% to P785.5 billion from the initial program of P989 billion as the government redirected funds for the pandemic response.

The DBM cited delays in construction work due to the community quarantine restrictions, as well as safety and health protocols. It also noted the high base in 2019, when the catch-up spending plan was implemented by the Department of Public Works and Highways (DPWH) due to a delay in the budget’s approval.

The September tally brought total spending to P153.5 billion for the third quarter, down 33% year on year but 8% up from P141.9 billion spent in the second quarter.

The third-quarter print was also 12% higher than the P137-billion target set for the period.

“The lower infrastructure expenditures for the period are mainly attributed to the temporary suspension of construction activities in early August with the two-week (lockdown) in place, as well as the limitations in construction works or activities with the implementation of existing health and safety protocols,” the DBM said.

Metro Manila and its surrounding areas reverted to the second strictest form of lockdown for two weeks in August, to curb the sharp rise in coronavirus disease 2019 (COVID-19) infections.

Filomeno S. Sta. Ana III, coordinator for the think tank Action for Economic Reforms, said the year-on-year drop in infrastructure spending has been widely anticipated given the pandemic but the quarter-on-quarter improvement  signaled a gradual recovery.

The DBM said the third-quarter spending goal was met after the government settled several accounts payables for the period and the DPWH continued with the implementation of infrastructure projects, although it was bogged down by rains and safety protocols.

Year to date, infrastructure expenditures were still down by 16.5% to P451.5 billion. The nine-month tally exceeded the P430.9-billion downward-revised target for the period.

“Infrastructure outlays are also expected to be relatively higher in the latter months when compared to the earlier part of the year, with bulk of the submission of progress billings from contractors and suppliers are made. More so that the DPWH continues to accelerate disbursements, especially for those completed and ongoing projects for completion within the year,” DBM said.

Lower infrastructure spending can limit economic recovery because of its promising stimulus on output, employment, household income, and value-added multiplier effects, said University of Asia and the Pacific (UA&P) School of Economics Senior Economist Cid L. Terosa in an e-mail.

Mr. Terosa said the economy may not fully realize the potential short- and long-term impacts of infrastructure spending if it remains sluggish in the coming months. Such a scenario may cause gross domestic product (GDP) to slump deeper than -5% this year, he said.

“The stronger performance of infrastructure spending relative to the goal for the first nine months of the year, however, is a positive sign that the government is exerting its best effort to stimulate economic growth and relieve some of the downward pressures caused by lethargic production activities,” Mr. Terosa said Wednesday.

“I expect the government to continue to spend more in the fourth quarter to prime the economy up for a stronger recovery next year,” he added.

However, too much fixation on growth should not be the case while the country is still battling the pandemic according to Mr. Sta Ana.

“Obsession with growth to the point that health measures are sacrificed or put on the back burner will eventually undermine growth,” he said in an e-mail interview on Wednesday.

“Thus even in terms of spending, priority should be given to health, social protection, and other non-medical interventions that will mitigate if not suppress COVID-19. Infra spending is relevant in relation to creating or preserving jobs,” he added. — Beatrice M. Laforga