By CHINO S. LEYCO
President Rodrigo R. Duterte’s approval of this year’s national budget will support the Philippines’ “robust” economic expansion, one of the three major international credit rating agencies said yesterday.
Christian de Guzman, Moody’s Investors Service senior vice president said the signing of the ₱4.1-trillion national budget will help sustain the country’s economic growth this year against an uncertain global backdrop.
De Guzman particularly noted the approval of the 2020 general appropriations act (GAA), which President Duterte signed into law last January 6, is a credit positive for the Philippines.
But despite the almost on-time enactment of the GAA, Moody’s is keeping its gross domestic product (GDP) growth forecast for the country at 6.2 percent owing to “lackluster global economic growth.”
Moody’s 2020 GDP projection is lower than the economic managers’ target of 6.5 percent to 7.5 percent.
To recall, an impasse in the two chambers of Congress led to a delay in the passing of the 2019 budget law that prohibited the national government to implement its public works and the disbursements of funds ahead of the election spending ban in May.
The delayed budget resulted in a 27.2 percent contraction in government spending on infrastructure in the second-quarter last year, which Moody’s estimated to be more than one percentage point of GDP.
For 2019, Moody estimated that the country’s economy grew by 5.8 percent, below the Duterte administration revised goal of 6.0 percent to 6.5 percent.
“We expect the pace of government spending to normalize and, along with residual spending from the 2019 budget, support a significantly largest fiscal expansion in 2020,” De Guzman said in a research note.
Aside from better economic performance this year, Moody’s also said the national government’s fiscal condition would strengthen following the passage of the law that raised excise taxes on alcohol and tobacco alternatives.
“We project underlying strengthening in Philippine fiscal metrics because of ongoing structural increases in revenue from tax reform,” De Guzman said.
“In 2020, revenue will be enhanced by scheduled increases in excise taxes effective at the beginning of this year, some of which were part of the Duterte administration’s first package of tax reforms passed in 2017,” he added.
De Guzman concluded that the Philippine government’s debt will remain stable, while borrowing affordability will improve.
In October, Moody’s kept the Philippines’ “Baa2” credit rating, which is one notch above minimum investment grade, and with "stable" outlook.
Moody’s earlier said the rating reflected the country's “high” economic strength, “moderate” institutional strength, “moderate” fiscal strength and “low” susceptibility to event risk.