Infrastructure spending falls 4.3% in first half after lockdown construction freeze

GOVERNMENT spending on infrastructure fell 4.3% year-on-year in the first half due to the suspension of construction during the lockdown, which was not offset by catch-up activity when restrictions were lifted in June, the Department of Budget and Management (DBM) said.

The DBM tallied infrastructure and other capital outlays of P297.9 billion in the first half, which nevertheless beat the downward-revised P279.4-billion target set when economic managers reduced growth projections for the year.

The DBM said the decline was largely due to the suspension of works during the enhanced community quarantine between mid-March to May, which are peak construction months before the rainy season sets in.

In June, infrastructure spending rose 44.5% year-on-year to P62.8 billion.

The DBM attributed the higher spending that month to construction, maintenance, upgrading, widening, repair and rehabilitation of roads, bridges, and flood control structures by the Department of Public Works and Highways (DPWH).

It said capital outlays for the modernization program of the Armed Forces of the Philippines (AFP) and payment of claims also contributed to the increased spending.

“It may be noted, however, that the infrastructure program for the period was lower when compared to the previous estimates prior the COVID-19 (coronavirus disease 2019) pandemic due to the temporary stoppage and delays in construction activities due to the various health quarantines imposed and minimum health protocols implemented in various communities,” it said.

In the second quarter, infrastructure spending was P141.9 billion, down 9.1% compared with the first quarter, when the lockdown started, affecting only late March. Year-on-year, the second quarter total was up 6.5%, coming off a low base.

Overall government spending, especially on infrastructure, was dampened in the first half of 2019 as the late passage of the budget that year delayed the implementation of new programs and projects.

The DBM said infrastructure spending, in general, was “muted”due to the suspension of construction and the productivity penalties imposed by health protocols when work resumed.

It said it expects the continued implementation of infrastructure projects of government agencies, along with other state expenditures, to “contribute to a faster economic recovery for the rest of the year.”

This year’s infrastructure spending program was trimmed for a third time last month, to P785.5 billion.

Overall spending for the year was increased to P4.335 trillion from P4.1 trillion originally to account for pandemic expenses and programs intended to pump-prime the economy.

The economy was in recession after posting two straight quarters of contractions, -0.7% in the first three months followed by a record -16.5% in the second quarter. First-half gross domestic product (GDP) growth was -9%.

The government is projecting a 2020 GDP contraction of between 4.5% and 6.6% due to the pandemic. – Beatrice M. Laforga