Philippines – Impact on growth: Economic managers to probe state agencies’ underspending

MANILA, Philippines — The government will closely monitor various state agencies that have been underspending their allocation as slow disbursements could impact economic growth this year.

Finance Secretary Benjamin Diokno said the economic team would look at every department that has been slow in utilizing their budget.

“This is some kind of discouraging because we have the money but we are not able to spend,” Diokno said.

“We will find out why they are underspending. Use it or lose it,” he said.

From January to May, state expenditures only inched up by 1.22 percent to P1.92 trillion, which the finance chief said is a concern for the government.

As of end-May, government agencies recorded a lower utilization rate of 91 percent from 93 percent in the five-month period in 2022 despite the increase in the releases of cash allocations.

Diokno said if the slow spending rate continues, this could impact economic growth this year.

“As an economy, our main driver is still consumption plus investments. As long as these two are picking up (we are okay),” Diokno said.

“But we really need to monitor government agencies. The easiest thing to do is to spend,” he said.

Among agencies, latest data showed that the Department of Migrant Workers still registered the worst utilization rate as of May at only 42 percent spent or P2.47 billion out of the P5.95 billion allocation.

The Department of Agriculture came in second with a utilization rate of 48 percent at P15.6 billion out of P32.57 billion, while the Departments of Social Welfare and Development came in third with a spending rate of 54 percent.

Other agencies with below 85 percent utilization rate include the departments of Agrarian Reform, Environment and Natural Resources, Human Settlements and Urban Development, Information and Communication Technology, Labor and Employment, Tourism, and  Transportation.

The current utilization rate of agencies will be taken into consideration in the 2024 budget.

The Department of Budget and Management already warned that departments and agencies who have low spending rate would see a reduction in their funding allocation for next year.

“It’s already June and if by now, you still have a huge amount to be spent and then you get another big budget for next year, you might choke and have more difficulty implementing,” DBM said.