image source: politico.com
Moody’s ups outlook for Philippines
MOODY’S Analytics has raised its full-year economic growth forecast for the Philippines following a surprisingly strong second quarter, but warned that continued government underspending amid tightened monetary policy could slow expansion next year.
In the case of the Philippines, however, expansion of economic activity in the country could be imperiled by slow public and private spending, Mr. Levine said separately by phone yesterday.
“The fixed investment cycle is slowing quickly, both from the private sector and public sector. It’s fading quickly. The PPP (public-private partnership) pipeline has slowed,” Mr. Levine noted.
“That, coupled with slightly higher interest rates that run through investment channels, could ease GDP growth to 5.5% next year.”
Data released by the Bureau of the Treasury last Friday put the budget gap last month at just P1.8 billion -- down 97% from P53.2 billion a year ago -- as revenues grew 15% to P166.7 billion from P144.6 billion while expenditures fell 15% to P168.5 billion from P197.8 billion.
The government has set a P550.977-billion spending target for this quarter alone, of which P107.884 billion -- nearly a fifth -- is supposed to go to infrastructure needed to support accelerating economic activity.
July’s tally, in turn, nearly halved the budget gap to just P55.7 billion in the first seven months from P104.5 billion the past year, as revenues grew 12% to P1.101 trillion from P984.1 billion and expenses edged up just 6% to P1.156 trillion from P1.089 trillion.
Mr. Levine thus pressed the government to accelerate spending, particularly on ports, roads, airports, and utilities, “to get the push we need.”
Another analyst, however, expects other drivers of growth to provide stable support for now.
In a separate note yesterday, economist Jun Trinidad of the research arm of Citigroup Global Markets, Inc., said “hopefully, private sector activities will continue to offset weak fiscal contribution to growth as evidenced by the second-quarter GDP growth... despite real fiscal expenditures were down 2.2% year on year.”
“This highlights benefits of investment-driven growth over the past years that resulted in a more diversified GDP growth base -- from non-tech manufacturing to BPO (business process outsourcing) and transport services. Any sector bbenefitingfrom investment flows can provide the upside growth surprise aside from the OFW (overseas Filipino workers) remittance story.”
Mr. Trinidad added that initial state spending slowdown after the Supreme Court ruled as illegal in July “acts and practices” to implement the Disbursement Acceleration Program (DAP) -- which the administration had described as a stimulus measure -- should lift as soon as the dust settles on this controversy.
“Post-DAP brouhaha, legal clarity of what can and cannot be done within the budget system would no longer be a botteneck [sic],” Mr. Tridinad wrote, adding this would leave the usual weather and systemic constraints as the only real hurdles to growth.
“Other than inclement weather, fiscal challenge would be down to absorptive capacity constraints.” - Business World Online