Too much, too late

Economists, both in government and the private sector, got a rude shock last Aug. 31 when the government announced that the country’s gross domestic product grew by just 3.4 percent during the second quarter of the year. “This was less than half the booming 8.9 percent growth in 2010,” Romulo Virola, secretary-general of the National Statistical Coordination Board, pointed out. But while it may be misleading to compare the two, considering that last year’s spectacular growth was propelled by massive election spending, still the April to June GDP growth rate this year was a big disappointment. And it was not just because GDP growth was much slower compared to last year’s rate but also because it was lower than what people who are supposed to know such things expected. The consensus forecast was 4.4 percent for the quarter.

Now everyone is scrambling to revise their estimates downward. Credit Suisse, a company that provides financial services, now sees the Philippine economy growing by only 4.3 percent for the whole year, down from its earliest forecast of 4.6 percent. HSBC, the multinational bank which earlier predicted a 5.2 percent growth in 2011, has also scaled down its forecast to 4.3 percent. And Global Source, a New York-based economic think tank, sees GDP growing at 4.8 percent for the year.

Earlier in August and before the official growth figure was out, Bank of America-Merrill Lynch already cut its growth forecast for the Philippines to 4.7 percent from 5.8 percent. This was part of its review of the growth outlook in Asean countries amid a slower growth in the United States, the debt crises affecting several European countries and the austerity measures developed countries were forced to adopt. The investment bank pointed out, however, that Philippine economic growth would still be higher than those of Singapore, Malaysia and Thailand, explaining that the Philippines and Indonesia have proven to be less vulnerable to “global downturns.”

But even as HSBC blamed the Philippine economic slowdown on falling exports caused by weaker world demand and “supply disruptions” from Japan,  most analysts said the principal culprit was underspending by the national government. Inquirer columnist Solita Monsod, a former socio-economic planning secretary, said that the “usual prescription” for reversing  an economic slowdown is injecting a “stimulus.” “At the very least,” she said, “our economic managers should have seen to it that the government’s programmed expenditures were spent.” Instead the government spent P140 billion less than what was programmed for the first semester. In the second quarter, expenditures for public construction contracted by 51 percent, trimming the GDP growth rate by 1.4 percent, Monsod said.

What seems clear is that there has been a pendulum swing from the free-spending ways of Arroyo administration to a  penny-pinching policy under the Aquino administration. Which is hardly a bad thing, given how the Arroyo administration lost billions of pesos to corruption or to useless projects, like the P200 million-plus squandered on safety railings and cat’s eyes installed on roads that are seldom used by motor vehicles in Leyte’s second district. In exercising greater care and caution in the use of the public funds, the administration  has not only ensured that the people get “more bang for the buck,” it has also trimmed the deficit, resulting in successive rating upgrades by international credit agencies.

Still, too much of a good thing can be harmful. Economic growth doesn’t have to be sacrificed for the sake of making sure that taxpayers get their money’s worth in every project. Hoarding cash is not the same as prudent management of resources.

But then the administration’s fiscal managers know this. They may not admit that they were wrong, but they are acting to correct the situation. Presidential Spokesman Edwin Lacierda has pointed out that the government disbursed P133.5 billion in July, stressing that this was “the highest national government spending figure so far this year.” Socioeconomic Planning Secretary Cayetano Paderanga said the government plans to spend P240 billion on projects during the second semester. But if the administration aims to use all the money it is authorized to spend, it will have to use up P1.12 trillion in the second half of the year.

This is a case of too much, too late – too much money, too little time to use it all, and too late to impact strongly on the GDP.