Budget Undersecretary Laura Pascua said this money — budget for public infrastructure such as roads, school buildings, irrigations etc. — is higher by 38 percent compared to P96.7 billion in 2005, which is about 1.6 percent of GDP.

The higher allocation will hopefully spur economic growth, Pascua told reporters after the joint press conference of the economic managers yesterday in Makati.

The proposed 2006 budget of P1.053 trillion is still pending approval in the Senate. Last year the NG budget was P918 billion.

The P133.2-billion allocation for capital outlays is 12.6 percent of total NG expenditures for 2006.

A large part of this funding or P96.6 billion is for infrastructures and other projects, higher from P64.3 billion in 2005. About P8.3 billion is reserved for local government units (from P6.9 billion last year) and P1.24 billion are equity.

Capital outlays have a significant impact on economic growth. In the past years the decline in revenues has compelled the government to make cutbacks in public spending.

As a result, NG capital outlays have been pushed down from two percent of GDP in 1997 to only 1.6 percent in 2001 and 1.8 percent in 2005, the lowest in the Asian region.

Capital expenditures in the Philippines averaged at 16 percent of total government spending in the 1990’s, compared with the Asian average of 25 percent for the same period. The lack of adequate public infrastructure can significantly impede the expansion of private investments over the medium term and hamper GDP growth.

In the meantime, with the imposition of the 12 percent value added tax, the government will allot 30 percent or P23 billion of P75 billion for public spending while P54 billion will be allotted to reduce deficit.(LCC)