The Philippines, like other developing countries, should be spending more to improve living conditions and be able to contribute to efforts against climate change, according to the World Bank’s Beyond the Gap report recently. Climate-smart infrastructure can be built by spending around 4.5% of GDP.

However, developing countries do have their fiscal challenges. For example, the Philippine government breached its deficit limit in 2018 with state disbursements reaching Php 3.408 trillion, higher than the Php 3.346 trillion target for 2018. This marks a 20.7% increase compared to the Php 2.824 trillion spending last 2017. Even with this huge spending, economic growth still settled at a three-year low of 6.2%, with the government blaming the underperformance on elevated price levels.

UnionBank’s Economic Research Unit (ERU) thinks that staying the course on infrastructure spending will benefit the economy in the long run. A delicate balancing act between meeting fiscal deficits and meeting spending goals for higher economic aspirations is much needed.

Article by Ruben Carlo O. Asuncion, UnionBank's Chief Economist

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