Global debt watcher Fitch Ratings on Tuesday kept its growth forecast for the Philippines this year at 6.1 percent, saying the economy is expected to rebound in the second half following a weak first-half performance following the delay in the approval of the national budget.
Fitch said in a report titled “APAC Sovereign Credit Overview 3Q19” that the economic growth of the Philippines would improve modestly in the second half.
“Growth was weighed down [in the first half] by the delay in budget implementation and a weak external environment. The agency is maintaining its full-year 2019 growth forecast of 6.1 percent, continuing to place the Philippines among the region’s fastest-growing economies,” Fitch said.
“However, we expect weaker global growth and escalating US-China trade tensions to prevent a stronger pickup in 2020 and 2021, and for growth to remain around 6.3 percent,” it said.
Fitch said its “BBB” credit rating for the Philippines balanced a net external creditor position and relatively high-growth rates compared with rating category peers, against lower per capita income, a weaker business environment and standards of governance.
The Philippine Statistics Authority said economic growth in the second quarter slowed to a four-year low of 5.5 percent, weighed down by the El Niño dry spell, rising protectionism in advanced economies, delay in the approval of the national budget for 2019 and the ban on construction activities in the run-up to the midterm elections last May.
This brought the first-half GDP average to just 5.6 percent, below the low-end of the government’s target range of 6 percent to 7 percent.
Economic Planning Secretary Ernesto Pernia said earlier that growth target of 6 percent to 7 percent for this year remained doable.
“We are hoping to achieve the low end of the target range, which is 6 percent, meaning, we must average by 6.4 percent in the second half to achieve this,” Pernia said.
Meanwhile, Fitch said the cumulative 175-basis-point increase in interest rates by the Bangko Sentral ng Pilipinas in 2018 band slowing growth momentum had lowered overheating risks.
This year, BSP reduced the benchmark borrowing interest rate by a cumulative 50 bps on account of a steady inflation outlook, which Fitch expects to come in at 3.1 percent in 2019.