Global debt watcher Moody’s Investors Service on Friday kept the 2019 growth forecast for the Philippines at 5.8 percent.
Moody’s said in its latest update and credit opinion for the Philippines on Oct. 10 that the catch-up spending implemented by the government would have a spill-over effect to the economy next year, which is projected to grow stronger at 6.2 percent.
“We expect that public spending will rebound in the second half of 2019 given government’s efforts to speed up the execution of the delayed 2019 budget,” Moody’s said.
Citing the latest available data, Moody’s said that in the first two months of the third quarter, national government expenditure excluding interest payments rose 71 percent, much higher than the 1.9-percent decline recorded in the first two quarters of the year.
Moody’s said the ongoing “catch-up” on several infrastructure projects and other “shovel ready” projects as well as scheduled public sector salary hikes should add to the fiscal impulse through the remainder of the year.
“We expect these trends to continue into 2020, with the government’s catch-up spending spilling over into next year. In addition, the proposed 2020 budget calls for a further 12-percent increase in national government expenditure, mostly in the areas of infrastructure, social services, and income transfers to poorer households,” it said.
“As such, we project real GDP growth to pick up slightly to 6.2 percent next year from 5.8 percent in 2019, in contrast to the slowing trend we have forecasted for more trade-dependent economies in Asia,” Moody’s said.
The economy grew 5.5 percent in the first half, slower than the 6.2-percent expansion in the whole of 2018, weighed down by the lower government spending due to the four-month delay in the approval of the P3.7-trillion national budget for 2019.
Aside from the delayed budget approval, other factors that exacerbated the sluggish growth of the economy were the weakening external environment and adverse weather conditions that impacted the agricultural sector.