MANILA – – Moody’s Investors Service has expressed optimism that the Philippine government will achieve its economic growth goal of 6.5 percent to 7.5 percent for this year
In a report dated Sept.14, 2017, the debt rater cited the 6.4 percent output in the first six months of the year, “with other indicators supporting a robust outlook through to the end of the year.”
“Growth is broad-based, from which we infer that it is likely to be sustained,” it said.
Moody’s is keeping its 6.5 percent growth target for the country this year while growth projection for next year is 6.8 percent, with the latter lower than the government’s seven to eight percent target.
It explained that “robust growth is supported by rising private sector investment, strong private consumption, and public spending, which more than offset the drag from net exports.”
It forecasts the sustained growth of the domestic economy “over the next few years, aided by the government’s focus on infrastructure development, buoyant private sector investment, and the recovery in external demand.”
The report said the ratings outlook on the domestic economy “indicates that upside and downside risks are balanced.”
“Strong GDP (gross domestic product) growth could accelerate even further, especially if the government achieves higher investment spending,” it said.
The government targets to increase, among others, infrastructure spending from the current five percent to around seven percent by 2022.
Its “Build, Build, Build” program is targeted to amount to about PHP8-9 trillion at the end of the current administration’s term in 2022.
Increased in the infrastructure spending raised budget deficit to around three percent of gross domestic product from two percent in the previous administration.
The higher spending comes with increased revenues, with the end-July 2017 level up by eight percent year-on-year to PHP1.37 trillion.
“Fiscal strength is likely to improve, potentially significantly,” the report said.
A plus for domestic growth is the young and growing population, it said.
The report, however, noted that “capacity constraints are emerging–including labor shortages in certain sectors–and these could prove more stringent than we currently envisage, giving rise to inflation.”
“High credit growth since 2014 also exposes the banking system to unseasoned asset quality risk,” it said.
Its growth forecast for 2018 leans on “continued uncertainties regarding the proposed comprehensive tax reform program (CTRP).’
“In the absence of a significant boost to government revenues from the passage of the CTRP, the government will likely pare back its plan to aggressively increase spending on infrastructure,” it said.
“Other risks include a worsening of the Islamist insurgency in Mindanao that could lead to the expansion of martial law, undermine both foreign and domestic business confidence, and disrupt economic activity in other parts of the country,” it added. PNA
