ADB to PH govt: Hike infra spending to 6%-7% of GDP

MANILA, Philippines – The Asian Development Bank (ADB) urged government to invest beyond Public-Private Partnerships (PPPs) to increase its infrastructure spending to 6% to 7% of the country’s gross domestic product (GDP).

On the sidelines of the launch of the 2013 Asian Development Outlook on Tuesday, April 9, ADB Country Director Neeraj Jain told reporters this level of spending is needed to address infrastructure constraints.

“The infrastructure deficit is building up year after year. If you don’t address the problem sufficiently, it keeps on becoming bigger and bigger,” he said.

The Philippines’ estimated GDP in 2012 was P6.31 trillion at constant prices. Based on this amount, the government must allocate some P378.89 billion to P442.04 billion every year to increase its infra spending to 6%-7% of GDP.

The government’s progress in increasing infra spending-to-GDP ratio has been slow. Currently the ratio is only 2%. The recommended ratio for all countries is 5%, said ADB.

More revenues

Jain said the government also needs to raise more revenues to meet the increase in infrastructure spending.

The ADB said that while government revenue take-up improved, tax revenue-to-GDP ratio remains low at 12.9%.

“To address that problem and to really make use of this positive environment that currently exists, of course we know that government has to limit the deficit at 2% of GDP, then it needs to raise revenues for increasing infrastructure spending and that’s the point. There has to be continuous effort to raise more revenues,” Jain said.

The ADB said government spending on infrastructure increased by 58% in 2012 after posting a decline of 29% in 2011. But this was still below target.

The bank said government “underspent” on budgeted allocations, allowing it to keep the fiscal deficit to 2.3% of GDP in 2011, below the programmed level. – Rappler.com