By Joann Santiago
MANILA, June 23 (PNA) — Fitch Ratings continues to forecast a 6.3 percent and 6.2 percent expansion for the Philippine economy for 2015-16 but cited the problem on public spending.
In its sovereign overview for Asia Pacific economies for the second quarter of 2015, the debt watcher noted the slowdown of domestic growth to 5.2 percent in the first quarter of 2015 from year-ago’s 5.6 percent.
”Fitch does not expect a significant pick-up in public investment as bottlenecks remain with respect to disbursement of public funds,” it said.
It stressed that “a narrow revenue base is likely to prevent a material increase in public spending.”
In the first four months of the year, government spending rose five percent year-on-year to Php660.6 billion from year-ago’s Php626.1 billion.
The slower growth of government spending, particularly on infrastructure, along with the same trend on the country’s export growth were the main factors for the deceleration of domestic growth from January to March this year.
However, economic managers are confident that growth would be faster in the succeeding months as government implements projects in Yolanda-affected areas as well as those delayed for implementation in 2014.
To date, Fitch gives the country an investment grade rating of “BBB-” with “stable” outlook. This rating is two notches above junk status, which the country graduated from in 2013.
The debt rater’s growth projection for the country is lower than the government’s seven to eight percent target for the two-year period.
Amidst the issue on public expenditure, the credit rater said the country continues to post high growth rates.
It has been posting a growth of over five percent in the last few years and credit rating companies continue to note that this has become a plus factor for the country.
Also, the country is now in a net creditor position, a big improvement from being a net borrower in the previous decades.
Inflation is also not a problem anymore and has been within target for some years now.
These factors, Fitch said, counters the low per capital income in the country as well as its long-standing structural weakness on governance and business climate and national government revenue base.
Additional factors for the country is when the strong domestic expansion is sustained, which would narrow the income and development differentials.
Collection of government revenues are on the uptrend, backed by fiscal reforms, and Fitch said that if this continues it would be additional advantage for the country.
Another plus for the country is the continued improvement of governance standards “that leads to a better business climate, which supports higher domestic and foreign investments.”
However, the credit rater said a decline in governance standards and or reversal of reforms put in place by the Aquino administration will be a negative along with the “a sustained period of overheating that leads to instability in the financial system.” (PNA)