Spending catch-up well under way as of August

STATE OFFICES have continued to catch up with their spending programs as of August to make up for lost time last semester in the wake of late national budget enactment, the Department of Budget and Management (DBM) reported on Tuesday.

The DBM said utilization rate of national government Notice of Cash Allocation (NCA) — authority given by the department to disburse funds to cover state offices’ operations, projects and programs — improved to 92% in the eight months to August, corresponding to P1.802 trillion worth of NCAs out of the P1.961 trillion in NCAs issued for that period, from 86% a year ago.

Total NCAs used, though, were down P9.51 billion in the eight months to August from the past year’s P1.811 trillion (out of the P2.116 trillion NCAs released to national government offices).

The DBM reported in the middle of last month that NCA utilization rate clocked in at 93% in the seven months of July from 78% the past year.

DBM said line departments used P1.303 trillion out of the P1.457 trillion in NCAs released to them as of August, equivalent to an 89% year-to-date NCA utilization rate

The DBM said that a higher utilization rate means line agencies were able to “disburse their allocated funds and implement their programs and projects” on time.

In a note e-mailed to journalists, Security Bank Corp. Chief Economist Robert Dan J. Roces said state spending will act as a “coping mechanism” for the country in the face of escalating global tensions. “Government spending will prove critical as a form of coping mechanism if the Philippines wants to get by in the current unpredictable trade war environment,” Mr. Roces said.

Given “still tenuous” household consumption, government spending will “carry the heavier burden” in driving overall economic growth as global trade is currently “unreliable” due to the continuing tariff row between United States and China, he said.

“For now, household consumption is still tenuous at best, with spending also being pushed by remittances from our overseas workers who are exposed to any global economic slowdown. If we take a look at levels of household spending, the level for the first half of 2019 is still slightly below the high inflationary period of 2018,” he explained.

At the same time, he said that household consumption is already at a “recovery stage” amid easing inflation.

Headline inflation clocked in at a three-year-low 1.7% in August, sending the year-to-date pace back on target at three percent, at the midpoint of the government’s 2-4% target range for 2019. It had seen successive multi-year highs last year, peaking at a nine-year-high 6.7% in September and October.

Gross domestic product grew by a disappointing 5.5% in the first half, and will have to expand by at least 6.4% in this semester to hit the lower end of the government’s 6-7% full-year goal.

For Mr. Roces, however, even six percent growth this semester would be “increasingly challenging,” though doable, depending on the speed of project deliveries.

“Another interest rate cut by the central bank may also help charge growth for the rest of the year; but given the challenges, our revised GDP estimate is now 5.7% for full year 2019,” he said

The DBM has released 91.4% or P3.354 trillion of the P3.662-trillion 2019 budget as of end-August.

The government spent P1.93 trillion in the seven months to July, still 0.11% less the year-ago P1.932 trillion, while spending on infrastructure and other capital outlays were still down 11.6% year-on-year at P386.6 billion, still far from the government’s P1 trillion full-year program. — Beatrice M. Laforga