Still slow

PHILIPPINES - In Brief 26 May 2015 by Romeo Bernardo

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Government finally released yesterday its expenditure report for 1Q15 validating our suspicion that it failed to spend as much as it had planned. The report showed non-interest expenditures rising 6.3% yoy, slightly faster than the last two quarters but below the double-digit growth rate of 1Q14. The amount also fell short of 1Q15 programmed spending by over 15%, which is not much of an improvement from last year. (See Chart) Officials in economic agencies we consulted tell us that the quarters ahead should be better, pointing to various possible reasons which do not sound particularly convincing to us (i.e., the larger programmed amounts remaining (about 78% of the budget), an Administrative Order to hasten implementation, performance bonuses attached to a 90% disbursement rate). We think that while there are earnest efforts on the part of the administration to speed up spending, not least to boost the chances of its yet unannounced candidate, it will have a hard time getting line officers to accept responsibility for projects at this time (see our last report, “Heading for the Homestretch”); not until it is able to persuade, with a strong presidential candidate, that it will remain in power post-2016. Most would agree that this is a dicey issue at this point. We are looking at lowering our GDP growth forecast on Thursday when government is scheduled to release the 1Q15 GDP figures.