MANILA — The Philippine government’s low debt level and high foreign reserves provide the Duterte Administration leeway to borrow more to finance its massive infrastructure program and help address risks to growth, a top economic think tank said.
Fitch Solutions is keeping its 6.1 percent growth forecast for the Philippine economy for 2019, after noting the 6.2-percent output, as measured by gross domestic product (GDP), last year.
In a report, the Fitch Group unit said external developments, such as the trade tension between the US and China and the faster-than-expected increase in the Federal Reserve’s key rates are projected to make investors look for safer assets.
However, it said that “risks to our growth forecasts in the near-term are evenly balanced.
It explained that to counter the negative impact of external developments the government could hike its expenditures even if it breaches the deficit cap of 3 percent of GDP.
It can finance the additional spending through increase in borrowing, it said.
“The relatively large foreign reserves (more than eight months of import cover) and low public debt load (42.1 percent of GDP) suggest that there is room for the government to borrow and spend aggressively, which would provide a short-term boost to growth,” it said.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that gross international reserves as of end-2018 reached USD78.46 billion, equivalent to 6.9 months’ worth of imports of goods and payments of services and primary income.
The Fitch report, on the other hand, stated that the additional expenditures “would likely come at the expense of longer-term macroeconomic stability.”
Economic managers have set the budget deficit ceiling for this year at 3.2 percent of GDP, to safeguard the economy’s investment grade ratings.
