Slow Use of Pandemic Funds Weighs on Philippines Growth Outlook

·2-min read
Slow Use of Pandemic Funds Weighs on Philippines Growth Outlook
Slow Use of Pandemic Funds Weighs on Philippines Growth Outlook

By Siegfrid Alegado and Andreo Calonzo

The slow deployment of pandemic relief funds in the Philippines is coming under scrutiny as delays risk impeding recovery for one of Asia’s worst-hit economies.

More than a month after President Rodrigo Duterte signed a P165 billion ($3.4 billion) relief bill, only 4.4 billion pesos have been released, according to the budget department. About one-third of the funds are mired in bureaucratic approvals, while the rest have yet to be requested by government agencies.

“Expediency is key right now to have a positive impact on economic recovery,” said Michael Ricafort, an economist at Rizal Commercial Banking Corp. in Manila. “There’s a need to speed up the disbursement and rollout.”

Elsewhere in Southeast Asia, Indonesia and Thailand have also faced stimulus bottlenecks. But in the Philippines, which suffered a record 16.5% contraction in the second quarter amid one of the region’s highest coronavirus case counts, the money earmarked for pandemic relief mostly comes from reallocated funds already in this year’s budget.

Slow government spending has been a perennial issue in the Philippines, where red tape and lawsuits among private contractors have delayed projects in the past. While Budget Secretary Wendel Avisado said funds for the first pandemic relief package, passed in March, have now been released, the government has conceded it was slow to utilize the money for projects including income support and cash aid.

To speed things up Duterte has allowed the budget department to release relief funds without his final approval, spokesman Harry Roque said Tuesday. Avisado said his department is working toward faster disbursement but needs supporting documents from other agencies to ensure that allocations are justified.

The government’s budget deficit for January-September stood at 879.2 billion pesos, less than the nearly 1.3 trillion peso deficit program, government data show. The lag in spending is due to the fact that the second pandemic relief law is “still to be implemented,” the Treasury said Oct. 23.

Reasons for the delay include:

  • Some tourism projects remain in the pre-qualification stage

  • Projects under a 24-billion peso agriculture program lack documentation and are still up for review

  • Some agencies have yet to submit special budget requests that include a financial plan, other documents related to monthly disbursements or project justifications

With the second pandemic relief law set to lapse in mid-December, urgency to spend is mounting. Fitch Ratings said in August that near-term growth prospects were deteriorating and state finances may be further pressured if the recovery stalls and more fiscal stimulus is required.

“After months of delays and protecting fiscal metrics, a protracted downturn in economic activity may actually lead to what the government had hoped to avoid in the first place: a credit downgrade,” said Nicholas Mapa, economist at ING Groep NV in Manila.

© 2020 Bloomberg L.P.