Infrastructure spending declines in December

Infrastructure spending slumped by nearly 20% in December, but still exceeded the full-year program, the Department of Budget and Management (DBM) said.

Latest data from the DBM showed that spending on infrastructure and other capital outlays fell by 19.8% or P36.3 billion to P146.7 billion in December 2024 from P183 billion in the same month in 2023.

“This was attributed to the combined impact of the base effects of high capital disbursements in 2023, as well as the ongoing processing and release of cash allocations for payments of completed and ongoing capital outlay projects of various departments/agencies during the latter part of 2024,” the DBM said.

For the full-year, expenditures on infrastructure and other capital outlays jumped by 10.1% to P1.33 trillion from P1.2 trillion in 2023. This also exceeded the P1.24-trillion program by 6.7%.

The DBM attributed the faster infrastructure spending to the implementation of the Department of Public Works and Highways’ (DPWH) banner infrastructure projects as well as defense modernization projects of the Department of National Defense.

DBM data showed overall infrastructure disbursements rose by 8.9% to P1.545 trillion in 2024 from P1.42 trillion in 2023. It exceeded the P1.473-trillion program for 2024 by 4.9%.

“This was equivalent to 5.8% of GDP, well within the 5-6% target for 2024 and sustaining the 5.8% outturn in 2023,” the department said.

Infrastructure disbursements also include infrastructure components of subsidy and equity to government-owned and -controlled corporations and transfers to local government units.

“This was credited mainly to the accelerated infrastructure spending of the DPWH for its accelerated implementation of construction activities, particularly from carry-over or previous years’ projects, progress billings from completed ongoing infrastructure projects, as well as the direct payments made by development partners for foreign-assisted rail projects of the Department of Transportation,” the DBM said.

Oikonomia Advisory and Research, Inc. Economist Reinielle Matt M. Erece said the P122.2-billion increase in infrastructure and capital outlays in 2024 was partly driven by defense modernization programs of the government.

“This can be in response to the heightened geopolitical tensions felt by a lot of countries,” he said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said faster infrastructure spending last year can be partly attributed to preparations for the May elections.

“(This is) part of the preparations for the midterm elections, as basis for accomplishments that are consideration for the voters to choose some candidates based on their completed projects and programs,” he said.

Mr. Ricafort said the government likely expedited infrastructure projects in the first three months of 2025 ahead of the election ban.

The Commission on Elections’ ban on public works spending began on March 28 and will run for 45 days. The midterm elections are scheduled for May 12.

Mr. Erece said he expects slower infrastructure spending as the government “reviewed and removed some of the unprogrammed appropriations and other expenses that the administration felt were unneeded, at least in the short term.”

Source: Business World

Below-target growth likely in 1st half of 2025

Philippine economic growth is likely to fall short of the government’s target in the first two quarters, GlobalSource Partners said.

“Our assessments show that GDP (gross domestic product) may be expected to increase within a narrow band over the next two quarters — rising from just above 5.7% in first quarter to approximately 5.9% in second quarter,” GlobalSource country analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said in a report.

This would be below the Development Budget Coordination Committee’s (DBCC) 6-8% target band until 2028.

GlobalSource’s first-quarter growth forecast of 5.7% would be slower than the 5.8% print in the same period in 2024.

For the second quarter, GlobalSource’s 5.9% GDP growth projection would be slower than the 6.4% print in the same period in 2024.

“This modest upward trend is driven by resilient historical GDP performance, growth in the services sector, and short-term USD/PHP exchange rate effects,” GlobalSource said.

However, local and geopolitical risks may affect the growth outlook in the first half.

“If both domestic and geopolitical shocks occur in a big, adverse way, they could unsurprisingly alter the outcome of this initial analysis,” GlobalSource said.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan earlier this month said government growth targets may need to be revisited amid rising global economic uncertainty.

“It’s too early to change at this point but we need to be watchful and be flexible because of this uncertainty,” he said.

A DBCC meeting is scheduled to be held at the end of March.

Budget Secretary and DBCC Chair Amenah F. Pangandaman has said that the committee historically keeps its target unchanged during the first and second quarters of the year.

Earlier, Finance Secretary Ralph G. Recto said that “6-6.5% [growth] is doable for 2025.”

However, GlobalSource said the Philippine economy should grow faster than the DBCC’s 6-8% target.

“The economic scarring of the pandemic actually requires the Philippines to grow by much more than the targeted growth rates of 6-8% through the end of the Marcos administration. Persistent poverty and income inequality are additional imperatives to grow by much more,” it said.

During the MAP Economic Briefing and General Membership Meeting on March 12, Mr. Guinigundo said that Philippine GDP growth of 6-8% annually would bring the economy to around P60 trillion by 2036

“To overcome this setback, growth will have to be between 9% and 9.5% through 2028 to be able to return to the original growth path,” he said.

In 2024, the economy expanded by 5.6%, from the 5.5% print in 2023 amid subdued consumption and lower farm output. It fell short of the government’s revised 6-6.5% target.

“It’s easy to blame the onslaught of typhoons during the latter part of the year, which constrained economic expansion. Such weather disturbances could indeed explain part of the failure, but not the entire dynamics,” GlobalSource said.

The economy grew by 5.2% in the fourth quarter, slower than the 5.5% print in the same period in 2023 after a series of typhoons hurt agricultural output.

“Sufficient stock buffering, mangrove propagation, zonal building along the coasts could have also mitigated the effects of these supply shocks. Yes, food inflation likewise deterred economic growth because private consumption spending was generally restrained,” GlobalSource said.

NEDA Undersecretary for Policy and Planning Group Rosemarie G. Edillon attributed the weaker-than-expected GDP growth in 2024 to “extreme weather events, geopolitical tensions, and subdued global demand.”

Source: Business World

Breaking down life insurance

Ever been approached by an insurance agent who offered you insurance that you never really understood? I'm sure it happens a lot. More often than not, we get insurance because of the following reasons: the insurance agent is a good friend, and we didn't want to turn him down, or we thought it was an investment. So let's try to give the low down on some basic concepts about life insurance.

There are two major types of life insurance: ordinary life (OL) and variable unit linked (VUL).

Ordinary life insurance. There are two types of insurance products that are classified under OL: traditional life insurance and endowment.

For traditional life insurance, living benefits come in the form of cash surrender values and/or dividends. Cash surrender value is the monetary amount that you would get in case you surrender your life insurance before the policy's maturity. Usually cash values start accumulating by the third or fourth year.

Thus, it will take a while before the cash values grow bigger than the total premium you are paying for. Policy owners can also take loans from cash values of their OL policies. Dividends, meanwhile, are the nonguaranteed cash benefits given to policyholders depending on the insurance company's performance.

The cheapest type of traditional life insurance is a term insurance where one is covered for a certain period of time or up to a certain age only. Term insurance has no cash values nor is it participating in any dividends distribution. However, term insurance can be converted to a traditional life insurance.

Aside from the traditional life insurance, endowments are also classified as an OL product. Endowments are different from traditional life insurance in that after paying premiums, you can periodically receive cash benefits after maturity. It is a good tool for forced savings. Returns are guaranteed but interests in the returns are most often lower than inflation.

OL products also have nonforfeiture options in case you'd like to surrender your policy before maturity and different settlement options for claims.

Variable unit linked. VUL insurance products are probably the most famous insurance product these days. A VUL is an insurance product with an investment component. It is like a term insurance and a mutual fund combined into just one product. Similar to OL, there is a fixed minimum death benefit or face amount. However, since VULs have an investment component, the death benefit can grow as your investment grows.

Unlike OL products, VULs don't have cash surrender values nor dividends. In VULs, a portion of your premium buys you units which have equivalent value called the Net Asset Value per Unit (Navpu). The Navpu changes on a daily basis, thus if you multiply your units by the Navpu, you will get the actual value of your investment or the account value.

A policyholder can regularly add to their investments to their VUL on top of the premium they are paying. These additional investments are called top-ups.

Usually, there are three types of funds where you can invest in: equities fund, balanced fund or bond fund.

Since these are investments, the returns you can get are not guaranteed, but you can potentially earn from 4 percent to 15 percent annually from your investment. Policy owners can also withdraw a portion of their investments but can incur withdrawal charges usually within the first five to 10 years depending on the product.

Note though that even if some VULs are considered limited pay, cost of insurance will still be deducted from your account values. It is advised to make regular top-ups so you won't deplete your account values. Once the account value becomes zero, the policy lapses.

For both OL and VUL, one can also have additional coverage that is called riders. Every insurance product can have different riders. These riders can come in the form of additional insurance coverage for death via accidents and disability due to accident, waiver of premiums in case of disability, critical illness coverage and a lot more.

Having insurance is an important aspect of personal finance and understanding the different types of life insurance products is just one step in picking the right one for you. In case you already have one, it might be a good idea to review its features and see what type of insurance you got. In case you're looking for one, remember that the key to picking the best insurance product for you is making sure it addresses your needs and is aligned to your goals.

Source: Manila Times