Slow gov't spending to keep PHL growth below 7% – Fitch

The Philippine economy will not likely keep pace with the government's growth target of 7 percent to 8 percent this year, debt-watcher Fitch Ratings Inc. said.

 

The gross domestic product (GDP) of the Philippines would only expand 6.3 percent in 2015, as public spending remains low, according to the latest Fitch report released Tuesday.

 

In the first quarter, the Philippine GDP slowed to 5.2 percent from 5.6 percent in the comparable 2014 period mainly due to weak government spending. 

 

"Fitch does not expect a significant pick-up in public investment as bottlenecks remain with respect to disbursement of public funds. Furthermore, a narrow revenue base is likely to prevent a material increase in public spending," it said.

 

The budget deficit dropped 60 percent in the first quarter as expenditures expanded only 4 percent while revenues rose 18 percent.

 

Fitch sees pressure building on emerging Asian sovereign credit profiles in general for the second quarter, with none of the said countries given a positive outlook. 

 

"Sovereigns across the region are seeing the effect on growth, external finances, and public finances from a combination of weaker commodity prices, the drag from a run-up in private-sector leverage, and anticipation of higher US interest rates," Fitch said.

 

The Philippines maintained its BBB- rating with a stable outlook, according the debt-watcher. 

 

The ratings agency, however, took note of the country's low per-capita incomes, narrow national revenue base and long-standing structural weaknesses concerning governance and business climate.

 

The Philippines trails other countries in the BBB range in terms of political stability, government effectiveness, control of corruption and rule of law, according to World Bank data cited in the report.

 

A sustained and strong GDP growth would  bring the Philippines on a par with peers in the BBB range in terms of income and development, according to Fitch. 

 

Further traction in fiscal reforms and continued reduction in government debt ratios would help widen its fiscal revenue base, Fitch noted. 

 

Strengthening governance standards, meanwhile, would supposedly foster a better business climate that supports higher domestic and foreign investment. – Keith Richard Mariano/VS, GMA News