Page 2 - SEPTEMBER 2017 B ISSUE

2 www.hello-philippines.com
PUBLIC INFRASTRUCTURE SPENDING
SUSTAINS DOUBLE-DIGIT PACE OF INCREASE
MANILA – Government
disbursements on infrastructure and
other capital outlays surged by a fourth
as the third quarter began, marking the
third straight month of double-digit
growth, the Budget department said
over the weekend.
State infrastructure spending and
other capital outlays grew by 25% to
P48.4 billion in July, from the P38.7
billion recorded in the same month
last year. It was, however, 6.7% smaller
than June’s P51.9 billion.
An assessment of the Department
of Budget and Management that was
e-mailed to journalists last weekend
attributed July’s year-on-year increment
to “the implementation of flood control,
road improvement and road widening
projects of the Department of Public
Works and Highways (DPWH).”
Also cited were the acquisition of
naval and air defense equipment under
the Armed Forces of the Philippines
modernization program; equipment
and infrastructure outlays under the
Department of Health’s (DoH) Health
Facilities Enhancement Program; as
well as payments for the right-of-way
acquisition for the ongoing Southwest
Integrated Transport System project
and civil works for the Light Rail
Transit-2 East Extension project that
will stretch this line by 4 kilometers
from Barangay Santolan in Pasig City to
Masinag in Antipolo City.
Infrastructure and other capital
outlays grew by 11.1% uptick to P297.5
billion as of July from the P267.7 billion
recorded in the comparable seven
months of 2016.
The year-to-date tally is equivalent
Moody’s: factory growth slowed in July
MANILA – Factory output likely
kept growing in July, though at a
milder pace, on the back of demand
for capital goods and food products,
Moody’s Analytics said.
Robust domestic demand fueled
a 7.3% annualized growth of the
manufacturing sector, albeit slower
than the 8.1% climb recorded in
June, the unit of Moody’s Corp. said
in a report e-mailed to journalists
over the weekend, with steady
increases from both business and
consumer segments.
If realized, July would have seen
the second straight month of slower
growth of this indicator.
“While industrial production
growth has eased through the
first half of 2017, the medium-
term outlook for the Philippines’
manufacturing sector remains
BUSINESS & FINANCE
to 61.35% of the P484.9-billion
infrastructure and other capital outlays
programmed for this year, as indicated
in the 2018 Budget of Expenditures and
Sources of Financing.
Sustained year-on-year growth
of these expenditures in those seven
months was likewise attributed to road
widening and improvement projects,
military modernization, as well as
improvement of health care facilities,
state universities and colleges.
Budget Secretary Benjamin E.
Diokno had said in July that state
expenditures are now “on the dot” as a
result of closer monitoring and follow-
up of the government’s five biggest
infrastructure spenders, namely: the
departments of Agriculture, Education,
Transportation, as well as DoH and
DPWH.
“The growth of disbursements
in July this year, which is double
the growth for the same month in
2016, is a positive indication that
the government has gotten past the
bright,” the report read.
“In large part, that reflects a
likely pickup in capital expenditure,
which should provide a boost to local
manufacturing,” it explained, adding:
“Domestic demand also remains on a
solid footing, keeping food production
buoyant, the largest component of the
industrial production survey.”
The Philippine Statistics Authority
(PSA) is scheduled to report both
manufacturing and external trade data
on Tuesday. Those data are related, as
manufactured goods account for more
than 80% of total merchandise exports.
In June, factory output volume
grew by 8.1%—still slower than May’s
9.8%—as the production of footwear
and wearing apparel quadrupled,
while output of fabricated metal
products more than doubled. Factories
churning out leather products, electrical
A portion of the Cordon-Aurora Road
in Quirino province is seen in March 21,
2017 photo after DPWH completed a
P631-M upgrade project.
adjustment stage or transition period,”
DBM said in its report, noting that
July last year saw infrastructure and
other capital expenditures “almost
flat” since it marked the first month of
the six-year term of President Rodrigo
R. Duterte.
“This gives us optimism that the
growth of government spending will be
sustained until the end of the year,” it
added.
“Line agencies still have around
five more months to expend these
allotments which could further increase
disbursement levels.”
DBM also noted that, historically,
disbursements pick up in the third
month of each quarter “in view of the
timing and processing of payments,
as well as the tendency of agencies to
speed up utilization of cash allocations
before they lapse at the last working
day of… the quarter.”
Such spending also picks up
every fourth quarter as government
accelerates its implementation of
machinery, wood and wood products,
basic metals, transport equipment, and
food also posted double-digit increases
that month, according to PSA data.
The Nikkei Philippines Purchasing
Managers’ Index – which tracks factory
activity in terms of new orders, output,
employment, suppliers’ delivery time
and inventory — saw the country’s
reading ease for the third straight month
to 52.8 in July. August saw the slowest
growth — 50.6 — since the survey
started covering the Philippines in
January last year. The 50 mark separates
readings denoting improvement of
factory activity from the preceding
month from those spelling erosion. The
July report noted “signs of softening
demand”, particularly as seen in new
orders, while the August report noted
“a softening” of sales to both domestic
and foreign consumers.
September 2017 / Fortnightly – No. 18 • UK & Europe Edition
projects and programs ahead of the
closing of books at the end of the year.
Promising. Government spending
will likely have a bigger contribution to
overall economic growth this year amid
signs that disbursements have picked
up faster than expected, a global bank
said, cementing an above-six percent
growth for the Philippines.
Economists at DBS Bank now expect
overall public spending to pick up by
6.4% this year, sharply faster than the
2.4% previously forecast as the global
bank saw expenditures surge by 7.1%
in the second quarter.
“The pace of monthly budget
spending has accelerated after a slow
start of the year,” the bank analysts said robust expansion at 16.5% this year,
in their fourth-quarter report.
“Budget spending grew 13.6%
(year-on-year) in 2Q17 and remains
in double digit as of July 2017,” they
noted.
“In the year up to July 2017, budget
spending grew a pretty strong 9.3%,
more than the 7.8% growth recorded in
revenue collection.”
These prospects would likely give
a lift to overall gross domestic product
(GDP) growth, which DBS sees
climbing by at least 6.4% this year and
6.7% by 2018.
“Growth momentum remains
pretty strong, given supportive private
consumption growth,” DBS said.
“There are some upside risks to
our forecasts, stemming from the
government’s infrastructure drive.”
Philippine GDP growth picked up
to 6.5% in the second quarter from the
6.4% recorded from January to March.
The year-to-date 6.45%
Despite the slowdown, Moody’s said
manufacturing growth “will not dim for
the foreseeable future” as the Philippine
economy continues its solid expansion.
The government is targeting
approximates the government’s 6.5-
7.5% full-year growth goal for 2017.
Economic managers have said that
the economy will likely see faster growth
this semester as more infrastructure
projects are rolled out.
DBS economists added that
consumer spending will remain a key
growth driver despite normalization
from the extra boost from the general
elections last year.
Investments will also lift growth
prospects further despite easing to
around 10%, coming from a peak of
20% over the last two years.
Exports are expected to sustain
even as this pace will continue to be
outpaced by import growth riding an
aggressive infrastructure development
program that will see some P8.44
trillion in government funds spent by
2022, when Mr. Duterte ends his term.
This will place the current account
in deficit, equivalent to 0.6% of GDP,
but unlikely to pressure on the Bangko
Sentral ng Pilipinas (BSP) to raise
interest rates just yet.
Inflation is projected to average
2.9% for the entire year, higher than the
1.8% logged in 2016 but below BSP’s
3.2% forecast for 2017. “The softer-
than-expected inflation in June-July
2017 has provided room for the BSP to
refrain from raising rates. But inflation
is slowly gaining momentum yet again,
even if it is set to remain well within the
2-4% target for now,” DBS said, adding
that it expects one rate hike from the
BSP this quarter and another in 2018.
n Elijah Joseph C. Tubayan and Melissa Luz T.
Lopez, BusinessWorld | September 11, 2017, 6:01 PM
Philippine Star file photo
of a domestic factory
an annual 8-10% growth for the
manufacturing sector over the next
six years, alongside 7-8% growth for
the Philippine economy. n Melissa Luz T.
Lopez, BusinessWorld | September 11, 2017, 6:52 PM