Higher infra spending,
cash-transfer expansion eyed
Infrastructure spending by the government is seen to hit 10.1 percent of the total economic output for the year as it moves to address the lack of infrastructure that is lowering the attractiveness of the country to foreign investors.
Government is also discussing to re-channel some funds to the conditional cash transfer in order to boost the government’s social spending program as advocated by the latest Economic and Social Survey for Asia and the Pacific of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
Dennis Arroyo, National Economic and Development Authority (NEDA) director for policy planning staff, said the government has recognized the need to boost the Philippines’ infrastructure spending in order to improve its image to investors. Infra spending in 2005 was equivalent to only 1.8 percent of GDP.
The balancing of the budget, however, will restrict the government’s spending capacity that the allocation will shrink to as low as 3.1 percent of GDP by 2013, according to Arroyo.
This however is enough to provide an average spending to GDP of 6.4 percent for the period, Arroyo added.
The lack of necessary infrastructure has been identified by Philippine Institute for Development Studies (PIDS) president Dr. Josef T. Yap, as one obstacle to the country’s lagging performance compared to neighbors. Yap noted that for the past 10 years, foreign direct investments to the Philippines have continuously declined.
Yap said that the Philippines, among others, has to "catch up" in its infrastructure to attract investors.
Arroyo said there is ongoing talks with the Development Budget Coordination Committee (DBCC) to shift funding from programs that experience leakages into the conditional cash transfer (CCT) program in order to expand the coverage of the CCT.
The ESCAP report urged governments in the Asia and the Pacific region "to increase social spending to consolidate the region’s stronger than anticipated economic rebound and to spur over the long term a fairer, more balanced, and sustained economic recovery."
The survey noted that even at the height of the crisis, the region was the fastest growing region in the world, but rising inflationary pressures, and asset price bubbles pose a threat to the balance of sustaining the momentum of growth and the financial stability.
"While monetary tightening may be necessary to retrain inflationary pressures, policy makers must be cautious about withdrawing fiscal stimulus package lest the fledgling recovery process is disrupted," it said.
The survey has also recommended the use of capital controls to moderate short-term inflows which has created asset bubbles, inflationary pressures and exchange rate increases.
Increasing social spending meanwhile directly supports income security for households by providing food security, education and access to health care, reducing the need by poorer families to maintain precautionary savings to protect against adversities, said ESCAP.
"These families are then able to contribute more to local economies and invest more in their own development," it also said.
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