A RESURGENCE of COVID-19 (coronavirus disease 2019) cases will pose risks to any construction-led economic revival because of the prospect of fund diversions away from the infrastructure program, Fitch Solutions Country Risk & Industry Research said.
Fitch Solutions raised its growth forecast for the construction industry to 13% this year from the earlier projection of 9.5%, it said in a note dated Jan. 19.
The government’s record budget of P4.5 trillion for 2021 and its focus on infrastructure projects are the main factors behind its view of double-digit construction growth, Fitch Solutions said.
It noted that the Department of Public Works and Highways (DPWH) received the highest year-on-year increase of any agency. Its budget rose 61.3% to P695.7 billion this year. The Transportation department’s allocation rose 4.4% to P88 billion.
“Given this budget allocation, we expect sectors such as roads & bridges, water infrastructure, and rail to contribute the most to the construction’s industry overall growth in 2021,” it said.
However, Fitch Solutions warned that the government could divert resources to pandemic containment if a new wave of COVID-19 should emerge, while new lockdowns are likely to disrupt construction works.
“We see some downside risk to these investment plans from further COVID-19 outbreaks in 2021, which could divert funding towards the pandemic response, as happened in 2020, and disrupt project developments due to lockdown measures. Given that the Philippines has experienced the second-highest fatality rate in Southeast Asia, after Indonesia, and the discovery of more contagious strains in the UK and South Africa, the Philippines remains vulnerable to another surge in COVID-19 cases,” the note read.
Projected increases in spending make public investment a key driver of the recovery, especially roads and railways, Fitch Solutions said.
Last year, the government reduced the budget of several government agencies, paring funding for projects and programs unlikely to be completed within 2020 because of the pandemic. The DPWH had its allocation reduced by 22% to P455 billion while the Transportation department’s funding was reduced by 17% to P82.912 billion.
Next year, Fitch Solutions flagged the risks posed by the national elections in May.
“On the one hand, it will mean that there will be a political willingness to complete projects under construction before the end of the current government’s term,” it said.
“On the other hand, since no (presidential) re-election is allowed in the Philippines, major projects currently at planning stage will be at risk of being reviewed under a new incoming administration, as has happened on repeated occasions with previous administrations,” it added. — Beatrice M. Laforga