Infrastructure seen key to preserving momentum amid weak consumption

INFRASTRUCTURE SPENDING holds the potential to support an economic recovery via job creation, with the consumption component that the economy traditionally depends on remaining weak, Maybank Investment Bank Economist Zamros Dzulkifli said.

“If the government could push for infrastructure spending this year, we can expect the share of expenditure to keep rising and support the economy and creating more jobs,” he said in an online briefing.

Infrastructure and other capital outlays hit P426.6 billion in the first half as more construction activity resumed, exceeding the P420-billion goal for the period, according to the Department of Budget and Management. Infrastructure spending rose 43% year on year.

In a separate briefing, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that an expected increase in infrastructure spending prior to the election spending ban next year could help boost the economy given the latest lockdown.

For this year, Mr. Dzulkifli said Maybank has retained its gross domestic product growth forecast at 5.5%, although the bank remains “cautious” about the economic outlook. This projection is below the 6-7% full-year target set by the central bank.

“We have already downgraded our 7.7% growth outlook for the second half and now we are looking at 7.1% with the on-going ECQ (enhanced community quarantine) in Metro Manila and surrounding areas,” he said.

The economy exited recession after 15 months, growing 11.8% in the second quarter from the record 17% contraction a year earlier. But recovery momentum slipped as the economy declined by 1.3% quarter on quarter in the three months to June period after posting a 0.7% quarter-on-quarter rise in the first three months.

Mr. Dzulkifli warned that economic scarring caused by the pandemic has led to a weak job market with unemployment and underemployment rates remaining relatively high.

In June, the unemployed increased to 3.764 million from 3.73 million in May, though the jobless rate was unchanged at 7.7%.

On the other hand, underemployment worsened to 14.2% from 12.3% — equivalent to 6.409 million workers, from 5.492 million in May.

Mr. Dzulkifli noted that some workers chose to work for their families in the farms or shops during the crisis, with some drawing only food and accommodation as pay.

“The government and the private sector need to create more jobs to fix wage concerns so we can keep robust growth in terms of consumer spending for the coming months,” he said.

Mr. Dzulkifli warned that household spending is likely to remain weak due to virus fears and economic uncertainty.

“The strength of the consumption for the next quarters will be quite weak unless the government speeds up the vaccination process and open up the economy,” he said. — Luz Wendy T. Noble

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