Public investment contributes more to growth under P-Noy

MANILA, Philippines - Public investment has contributed more to economic growth during the Aquino administration than in the previous decade, reflecting the benefits of better projects and procurement processes.

“Economic growth is more strongly correlated with NG (national government) capital outlays starting July 2010,” Finance undersecretary and chief economist Gil Beltran said in an economic bulletin.

“This means that NG capital outlays since then have had more significant contribution to economic growth than previously,” he said.

According to Beltran, an increase of one percent in public investments has added 0.88 percentage points on real gross domestic product (GDP) growth from July 2010 to September 2015.

GDP is the sum of all products and services created in an economy. Real GDP is the main gauge used to measure economic activity.

The five-year positive correlation during the Aquino administration was higher than the 0.72 percentage points added by every additional percent of public investments from July 2000 to July 2010.

A positive correlation suggests that public investments and GDP growth move in tandem such as when one increases, the other rises too, and vice-versa.

“Reform in procurement, project planning and design and performance evaluation of NG agencies contributed to more efficient NG capital outlays,” Beltran said.

“Such reforms should continue to be implemented,” he added.

Sought for comment, Jose Ramon Albert, senior researcher at the Philippine Institute for Development Studies, said while it is good growth is benefiting more from public investments, their private counterparts are more important.

“Empirically, NG investments are important, but it is the private sector investments that matter for sustainability,” Albert said in an e-mail over the weekend.

Based on Beltran’s figures, private investments showed insignificant contribution to economic growth for both pre- and during Aquino administration.

“It is possible that the effect of private investments were understated if PPP (public-private partnership) investments were not included,” Albert said.