Spending Restraint?

PHILIPPINES - In Brief 30 Oct 2013 by Romeo Bernardo

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Growth in government spending decelerated further in September in what may be seen as an immediate impact of the still unfolding pork barrel (PDAF) scandal as agencies have likely become extra cautious in releasing funds for projects.  Data released today showed government non-interest expenditures inching up by only 2.4% last month, down from a 7.4% increase in August which in turn was a sharp decline from growths of 30% in July and an average 13.5% in 1H13.  While this will affect the economy’s 3Q13 growth performance, the high one-month increase in July spending will help in averaging up government’s expenditure growth for the quarter.The question moving forward is if spending will remain anemic or if government will be able to make a comeback.  The worry is that with the added mayhem over the Administration’s Disbursement Acceleration Program (DAP), a budget mechanism that has allowed the President to use unspent funds in the budget for other programs, government spending will be even more restrained in the remaining months of the year.  The issue is complicated as on the one hand, there are expert views that the DAP is an illegal budgetary practice and many deem its partial allocation to congressional projects as simply additional pork barrel funds; on the other hand, it is widely recognized that the economy’s stellar growth owed much to fiscal stimulus which had in part been delivered through the DAP.  In his speech this evening defending the DAP, the President cited calculations by the World Bank that spending through DAP contributed 1.3 percentage points to growth in 4Q2011.  We continue to watch closely how this whole controversy will unfold, especially its po...