FITCH RATINGS on Wednesday joined another credit rater and various multilateral organizations in cutting Philippine economic growth projections, due largely to a delayed national budget that is expected to crimp state spending.
In its APAC Sovereign Credit Overview 2Q 2019 report, Fitch Ratings — which in December affirmed the Philippines credit rating at “BBB,” a notch above minimum investment grade, with a “stable” outlook — slashed its economic growth forecast for the Philippines to 6.2% for this year from the 6.6% projection it gave in December “as it expects the recent budget delay and external factors to weigh on growth.”
Fitch’s latest projection compares to similar downward revisions adopted by other outfits since the year began: S&P Global Ratings’ 6.3%; the World Bank’s and the Asian Development Bank’s 6.4%, as well as the 6.5% given by the International Monetary Fund, as well as by the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development and the five UN regional commissions including the United Nations Economic and Social Commission for Asia and the Pacific.
GDP growth slowed to 6.2% last year from 6.7% in 2017 and 6.9% in 2016.
The inter-agency Development Budget Coordination Committee in mid-March slashed its 2019 GDP growth assumption to 6-7% from 7-8% originally as the government operated on a reenacted budget, and some state economic managers have said the government will be hard-pressed to catch up with the state spending program this year.
The Finance department reported on April 21 that delayed enactment of the 2019 national budget — cut to P3.662 trillion after President Rodrigo R. Duterte vetoed P95.3 billion in appropriations when he finally signed it into law on April 15 — resulted in “P1.01 bln [billion] daily underspending for primary expenditures (non-interest payments)” and made state disbursements miss the program by 11% at P777.99 billion in the first quarter, although they edged up a percent from a year ago.
Fitch Ratings, which sees GDP growth picking up to 6.3% next year, expects weak exports amid US-China trade tensions and muted remittance growth to “also exert some downward pressure on growth.”