S&P cuts PH growth projection to 6.3%
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Mon, 29 Apr 2019 16:25:44 +0000
S&P Global Ratings has trimmed its Philippine growth forecast for 2019, citing high interest rates and the delayed approval of the national budget as reasons behind the adjustment.
A report released on Monday showed that the debt watcher has a 6.3-percent growth outlook for the Philippine economy this year, a slight downward adjustment from the previous 6.4 percent.
The projection was higher than last year’s actual growth of 6.2 percent and falls near the lower end of the government’s downwardly revised 6.0-7.0 percent target.
“We expect growth to remain in the low end of the 6.0-6.5 percent range in 2019, as the lagged effects of last year’s monetary tightening dampen private investment, and the budget delay affects the government’s Build Build Build program in the first half of the year,” S&P said, referring to the Duterte administration’s ambitious infrastructure program.
The recent passage of the national budget, it added, “caps the drop in the 2019 fiscal impulse somewhat, but does signal a weak public investment outturn for the first half of the year.”
The credit ratings agency also noted the possibility that only a few key national projects are likely to be exempted from the election spending ban on the government.
The 2019 budget was only signed by President Rodrigo Duterte last week after months of delay — caused by a dispute between the Senate and the House of
Representatives over alleged insertions that he ultimately vetoed on.
The controversy forced the government to operate on last year’s budget since the start of the year. This meant it could only spend for items detailed in the 2018 outlay and not on programs and projects supposed to be implemented in 2019.
The Finance department has said the budget impasse limited its capacity to spend in the first quarter, resulting in a lower-than-programmed budget deficit for the period.
It earlier reported that a P1.01-billion daily underspending for primary expenditures resulted in a lower-than-programmed state spending of P777.990 billion in the three months.
The first-quarter budget shortfall of P90.245 billion was 40.6 percent lower than the P152.171 billion posted in the same period last year. It was also 52 percent, or P98.108 billion, lower than programmed.
Meanwhile, above-target inflation prompted the Bangko Sentral ng Pilipinas’ policymaking Monetary Board to hike key interest rates five consecutive times last year, only pausing after consumer price growth began easing last November.
A third pause resulted from the last policy meeting on March 21, with monetary authorities noting the need for more data.
“Despite these headwinds, they have a beneficial impact on net exports via slower import growth, while the fall in inflation will support an acceleration in consumption,” S&P said.
|Latest available data show that imports growth slowed to 2.6 percent in February from 3.6 percent and 13.7 percent from a month and a year earlier.
On the other hand, March’s 3.3-percent inflation — a 15-month low — placed the year-to-date average at 3.8 percent, within the central bank’s 2.0-4.0 percent target.
Risks
S&P, however, flagged the accommodative monetary policy in advanced economies, the El Niño phenomenon, and the delayed national budget as risks to growth.
“The risk of further disorderly capital outflows from emerging markets continues to narrow as major central banks dial back on language around future tightening,” it said.
In the domestic scene, the credit rater said potential resumption in inflation was still present due to El Niño, but stressed that the recent trajectory suggests that risk was narrowing, as well.
Lastly, it said the delayed passing of the budget coinciding with the preelection ban on public projects “could result in an even sharper drop in fiscal impulse than expected if post-election projects take a while before they break ground.”
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