The 2018 National Budget, Infrastructure, and Economic Growth

The government slogan “Build, build, build!” resonates for many, especially those who have some grounding on economic growth theories. In a serious attempt to address the country’s decrepit infrastructure, the administration decided to pour in funds for “hard infrastructure” and implement projects that are physically necessary to facilitate trade and improve the country’s business climate.

The primacy of infrastructure development is very evident in the national budget for 2018 given the lofty sum apportioned to the sector. In his budget message in July 2017, President Duterte himself said that there was P1.097 trillion ($22.03 billion) to be allocated for infrastructure development in 2018. This is nearly one-third of the total 2018 national budget. To illustrate, the Department of Public Works and Highways (DPWH) will receive the largest departmental allocation in the 2018 national budget. DPWH, given its infrastructure development programs, will get P637.86 billion ($12.8 billion) — even surpassing the P553.3 billion budget of the Department of Education (DepEd), which usually receives the highest allocation among all government agencies. This is equivalent to 16.9% of the country’s total 2018 budget and is higher by 40.3% from the previous year’s budget. This budget will primarily be available for the construction, rehabilitation, and improvement of transportation infrastructure and flood control systems.

In addition, the Department of Transportation (DoTr) has been provided with P66.3 billion ($1.33 billion). This is a 24.4% increase in its annual budget compared to its allocation in 2017. In line with its mandate, the DoTr budget should allow for the provision of a safe, affordable, and comfortable public transportation system, especially big-ticket railway projects.

Then there is the P10-billion ($201 million) budget — predominantly allotted for infrastructure projects — to support the rebuilding and rehabilitation of Marawi, which has been shattered by a catastrophic siege that has resulted in severe human and physical damage.

Several studies on the growth of national economies show how transport infrastructure improvements ( including road networks, airports, railways, ports, and logistics) have led to increased trade flows. Infrastructure, particularly information and communications technology (ICT), also strengthens trade, as the density in numbers of telephone lines, mobile phones, broadband access, Internet users, and secure Internet servers have a positive impact on trade for both exporters and importers.

Relatedly, it has been shown that, in lower-income countries, domestic revenue collections have a positive effect on firm performance, which could be channeled into the financing of public infrastructures that are vital to firms. Indeed, it has also been revealed in studies that tax revenue resources had a positive effect on infrastructure development. These studies recommend that the government should provide the necessary human and material infrastructure that are needed