Fitch Solutions lowers 2019 PHL deficit outlook

Fitch Solutions Macro Research on Monday lowered the budget deficit outlook for the Philippines this year, because of underspending by the government for the whole of 2019.

The risk solution company now expects the Philippine deficit at 2.8% of the gross domestic product (GDP), and compares with the government target of 3.2% and Fitch Solutions’ earlier forecast of 2.9%.

“We expect expenditure to slightly undershoot the P3.661-billion allocated budget given a likely increase in expenditure only in late 2019,” Fitch Solutions noted.

Congress failed to pass the 2019 budget on time, and President Rodrigo Duterte was able to sign the General Appropriations Act only in April.

As a result, government spending slowed down, and the Duterte administration blamed the reenacted for the economic slowdown in the first two quarters of the year.

Duterte’s economic team plans to spend aggressively on infrastructure until the end of the year.

In the second quarter alone, Fitch Solutions noted that the budget balance came at 2.3% of the GDP, narrower than the 2.4% recorded the same period last year.

“The narrower budget balance in the first half of 2019 is attributed to strong revenue generation and delayed expenditure by the government, following the protracted process in passing the 2019 budget,” it said.

Spending is expected to improve in 2020, with the Philippines likely to registered a budget deficit of 3.2% of the GDP.

“Given the cash-based approach to budgeting, infrastructure will receive strong public investment through 2020, which alongside continued efforts to attract foreign direct investment, could boost output capacity for the country over the coming years and support Duterte’s targeted 6-7.0% real GDP growth rate,” Fitch Solutions said. —Jon Viktor Cabuenas/VDS, GMA News