April 20, 2014

Government sets targets by 2016

Various newspapers today reported on the revised 2011-2016 Philippine Development Plan goals. By 2016, government is looking to bring down unemployment to 6.5-6.7% from 7.1% last year, poverty incidence to 18-20% from 25.2% in 2012 and raise the ratio of infrastructure spending/GDP to 5% from 2%.

The latter entails an infrastructure spending of around P800b by 2016. More importantly, the plan has grouped provinces in terms of the required government intervention (e.g., investments, social services, disaster risk reduction and social insurance) to ensure best use of resources.

Our take: Given the limited time before the current administration ends its term by 2016, we view positively its more targeted approach as this will not only result in optimum use of resources but also ensure specific goals to be achieved. We believe that a higher infrastructure spending/GDP ratio target is necessary to sustain of economic growth beyond 2016.

While the rehabilitation and rebuilding works in central Philippines can help government in boosting infrastructure spending, we think that it will be just as crucial for government to sustain spending on infrastructure projects covered by the annual budget (e.g., flood control and management, roads and bridges) as well as regain credibility and investor confidence by ensuring that the projects under the Public Private Partnership program are pursued as scheduled. – WealthSec