Aquino Budgets $934 Million This Year for Typhoon RebuildingKarl Lester M. Yap and Joel Guinto
Philippine President Benigno Aquino plans to spend an initial 40.9 billion pesos ($934 million) this year for the reconstruction of communities damaged by Super Typhoon Haiyan last month.
The government will rebuild infrastructure, housing, agriculture, and create jobs in the first phase of the plan, Communications Secretary Sonny Coloma said Nov. 30 at a briefing in Manila broadcast on government radio. The total cost of reconstruction will be higher and will depend on further assessment, he said.
Spending on roads, homes and bridges will help support an economy that expanded last quarter at the slowest pace in more than a year. Policy makers estimate Haiyan will curb growth through the first half of 2014 and the Philippines benchmark stock index was the worst performer in the Asia-Pacific region in November as investors assessed the impact of the typhoon on earnings and gross domestic product.
“Reconstruction is likely to take years, possibly three to five years, and the total cost is likely to be way more than this,” said Gundy Cahyadi, a Singapore-based economist at DBS Group Holdings Ltd. “Revenue collection has been pretty supportive in recent years, and that’s a big plus. As long as that persists, and given that growth momentum is still quite robust, financing concerns are unlikely to be that significant for now.”
The initial reconstruction expenditure will be partly financed by calamity funds and unused money from a budget lawmakers can use at their discretion, Coloma said.
The Philippine Stock Exchange Index has fallen more than 3 percent and the peso has dropped more than 1 percent against the U.S. dollar since Haiyan struck on Nov. 8, leaving more than 5,600 people dead and 4.1 million displaced as of yesterday morning. The stocks gauge dropped 5.7 percent last month.
The government has identified 171 municipalities, with a total population of 6.6 million, who will be given priority for spending, Coloma said. Some municipalities in central Philippines, which were hardest hit by the storm, still do not have electricity and water supply, the government said in its 6 a.m. disaster assessment report yesterday.
The World Bank has offered almost $1 billion of aid, while the Asian Development Bank pledged $23 million in grants for relief operations and $500 million in emergency loans for reconstruction.
The government will hold meetings with investors in the U.S. in the first week of December to update them on rehabilitation plans, Treasurer Rosalia de Leon said last week. A benchmark-sized global bond sale is being planned in 2014, she said Nov. 21.
The Philippines won its first investment-grade ranking from Moody’s Investors Service, Fitch Ratings and Standard & Poor’s this year after Aquino boosted revenue and narrowed the budget deficit from a record in 2010.
Gross domestic product rose 7 percent from a year earlier in the three months through September, compared with a 7.6 percent gain in the previous quarter. The government is keeping its expansion target of 6.5 percent to 7.5 percent for 2014, Economic Planning Secretary Arsenio Balisacan said last week.
Central bank Governor Amando Tetangco said the typhoon will affect growth from this quarter through the second quarter of next year, citing the economic planning agency.
Damage from Haiyan, which destroyed roads, farms, towns and an entire city in the Visayas group of islands, is estimated at $6.5 billion to $14.5 billion, according to catastrophe modeling firm AIR Worldwide. The local economies of the affected areas, which account for about 12.5 percent of the country’s GDP, may contract 8 percent to 10 percent next year, Finance Secretary Cesar Purisima said Nov. 12.
The government is targeting a 242.1 billion-peso budget deficit this year, or 2 percent of GDP, according to the Finance Department. The goal next year is 266.2 billion pesos, also about 2 percent of GDP.
Policy settings remain appropriate and there appears to be no reason to alter the central bank’s stance, Tetangco said Nov. 29. Bangko Sentral ng Pilipinas has held its benchmark interest rate at a record-low 3.5 percent since Oct. 2012, and cut the rate on its special deposit accounts three times this year.
The Philippine economy may expand between 4.1 percent and 5.9 percent this quarter, Balisacan said Nov. 14, commenting on the impact of the storm.