THE government’s decision to refocus its flagship infrastructure program will help the Philippine economy recover faster from the coronavirus disease 2019 (COVID-19) pandemic, the International Monetary Fund (IMF) said.
“This realignment of projects, together with continued structural reforms to improve the efficiency of public investment… would help the Philippine economy recover faster from COVID-19 while continuing to lay the foundation for rapid and inclusive growth in the new normal,” IMF Resident Representative to the Philippines Yongzheng Yang said in an e-mail to BusinessWorld.
The National Economic and Development Authority (NEDA) Board, chaired by President Rodrigo R. Duterte, last month approved a revised list of 104 projects worth P4.1 trillion under the “Build, Build, Build” program, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua told a Senate budget hearing on Sept. 10.
The new list included the national broadband program, an irrigation project, transportation infrastructure projects and the construction of the Virology Science and Technology Institute of the Philippines.
“We welcome the emphasis given by the government to projects related to health, digital economy (including the national ID project), transportation, and water resources,” Mr. Yang added.
The IMF official noted the Philippine government should focus on fast-tracking ongoing and shovel-ready projects that will generate more jobs and allow businesses to reopen.
“The government’s current effort to reprioritize its infrastructure investment program in response to the impact of the COVID-19 pandemic would help make the best use of public resources. Given the urgent need to save lives and safeguard livelihoods in the wake of the pandemic, a realignment of public investment projects is necessary to provide more support to the health sector, the vulnerable people, and the affected businesses,” Mr. Yang said.
The Washington-based multilateral lender projects Philippine gross domestic product (GDP) to shrink by 3.6% this year as it factored in a slower recovery from the pandemic. It will release an update to its economic forecast in October.
As the pandemic drags on, governments around the world are seeing a decline in revenues and rise in demand for public spending.
“(It) has become even more important for governments around the world to improve the efficiency of using public resources, including for infrastructure investment,” IMF’s Mr. Yang said.
An analysis by IMF showed countries waste about a third of infrastructure spending due to inefficiencies such as corruption, delays, and cost overruns.
“The loss can surpass a staggering 50% in low-income countries. Unlocking this potential should play an important role as countries recover from the pandemic,” the IMF said in a blog.
The IMF said public investment has the potential to boost demand by improving lives, connecting markets, and building resilience against climate change and future pandemics. This can be done through investment in healthcare systems as well as digital and environmentally conscious infrastructures.
Prior to the pandemic, IMF’s review of the Philippine public investment program in 2018 showed the country fared better than average emerging market economies in terms of national and sectoral planning, budget comprehensiveness and unity, budgeting for investment, availability of funding, and monitoring of assets.
“However, the review also identified several areas for improvement and made a number of recommendations to improve performance, including in fiscal risk management, public-private partnership, and public procurement,” Mr. Yang said.
In the first semester of 2020, the government’s spending on infrastructure fell by 4.3% year on year to P297.9 billion, as the lockdown disrupted economic activity.
In June alone, infrastructure spending jumped 44.5% year on year to P62.8 billion as construction activities restarted after restrictions were eased.
Under the proposed P4.5-trillion national budget for 2021, the government increased the budget for infrastructure development by 41% to P1.107 trillion from the reduced P785.5-billion budget this year. The biggest allocation is P157.5 billion for the Department of Public Works and Highway’s network development program.