October 20, 2015

Government beefs up spending in August

Quoting data from the Budget department, news portal interaksyon.com reported that total government disbursements grew 15.3% YoY in August and 11.4% in Jan-Aug this year. More importantly, the report showed infrastructure spending grew 29.2% during the month and 21.5% in Jan-Aug. The disbursements were further bolstered by the 46% hike in maintenance spending (on higher funding support for the conditional cash transfer program, indigent senior citizens pension program, and Armed Forces equipment maintenance), as well as the 184% hike in support for government-owned and –controlled corporations. The latter is largely due to the P4.4b housing subsidy for resettlement of informal settlers and P3.8b allocation for a multi-
purpose dam project.

Our take: The numbers bode well for the economy given that the weakness in GDP growth over the past two quarters has been largely traced to weak government spending. It is also important to note that government spending growth over the last three months have reportedly been growing at an average of 20% vs. 6.7% in Jan-May. Furthermore, the numbers point to increased utilization rates of cash allocations for construction of classrooms, farm-to-market roads, and roads-to-tourist destinations which should provide immediate catalysts for growth. Barring any major destruction from calamities, the acceleration in government spending should bode well for economic growth and eventually for overall market sentiment. – WealthSec