By Chino S. Leyco
One of the three major international credit rating agencies is lukewarm about the ability of the national government to fully implement its catch up spending plan to help boost the country’s slowing economic growth due to the delayed approval of this year’s budget.
In a briefing, Christian de Guzman, Moody’s Investor Service senior credit officer said yesterday that it will be very challenging to completely execute the P3.7-trillion national budget for this year, which will somehow affect the country’s growth performance.
For 2019, the Moody’s already lowered its gross domestic product (GDP) forecast for the Philippines from the original 6.2 percent to 6.0 percent following the below-target growth in the first-quarter and budget delay.
“Even the government’s intension is to catch up, it will be very challenging to fully execute that budget,” De Guzman said, but he noted there will “some degree” to public spending recovery in the second-semester of the year.
The key challenge for the government’s catch up program is the unfavorable weather in the second half of the year, the Moody’s representative said.
For this reason, de Guzman estimated that the economic growth for the second-quarter of the year may still fall below the Duterte administration’s target of 6.0 percent to 7.0 percent.
“I don’t think you should be excited about the second-quarter,” De Guzman said. “Because of the budget impasse you already lost four months, [and] because of the election ban you also have another month.”
“Our expectations for second-quarter are not really great either,” de Guzman said, without providing any figure.
However, the slow implementation of the government’s catch up has a “silver lining,” de Guzman noted.
“The concern in terms of overall of the situation if catch won’t occur, I do think there’s a silver lining,” de Guzman said. “We’re credit raters and one of the things that we look at is the fiscal position.”
“If catch up will not occur in a significant way, we will have a lower than programmed fiscal deficit which will continue to support that consolidation,” he added.
Last month, de Guzman said that the slower expansion in the first quarter compelled the ratings agency to lower its full-year GDP forecast for the country.
Aside from domestic concerns, de Guzman also cited the external headwinds in the downward revision of the growth forecast, including the lingering trade tension between the US and China.
Earlier, Finance Secretary Carlos G. Dominguez III assured that they can bring the robust economic growth rate back on track on the second semester of the year after the disappointing 5.6 percent growth in the first three-months of the year,.
Dominguez explained the government has already identified areas where it can speed up public investments to enable the economy to hit an above six percent growth for this year.
“We are confident we can bring our pace of growth back on track in the second half of the year. The majority of our people see a better life for themselves this year. We will not disappoint them,” Dominguez said.
According to Dominguez, the economic managers have formed a catch-up plan, which involves government spending of around P2.996 trillion from the second to fourth quarters of the year.
Under the P2.996 trillion catch up plan, infrastructure disbursements would account for almost a third of the amount at P792.97 billion, Dominguez said.
He added the Department of Agriculture has also crafted its catch-up plan to energize the anemic agriculture sector and committed it to contribute significantly to gross domestic product (GDP) growth this year.
“In addition to the public sector, we are hoping private construction will perform as we expect. Private sector construction will help supplement public spending to provide the stimulus for overall growth to pick up,” Dominguez said.