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Fitch unit: Philippines budget gap at 9.3% of GDP
A Fitch Group unit has raised its forecast for the Philippines’ budget deficit this year as the coronavirus disease 2019 (Covid-19) pandemic continues to affect government revenues.
In a report on Thursday, Fitch Solutions said it expected the government to post a fiscal shortfall of 9.3 percent of the country’s gross domestic product (GDP) in 2020, wider than its previous estimate of 8 percent.
Its newest outlook is also wider than the 3.2 percent in 2019, but narrower than the government’s official assumption of 9.6 percent.
Fitch Solutions said its forecast was “due to the outlook for revenue deteriorating under our revised growth outlook.” It now sees the Philippine economy to shrink by 9.1 percent from its previous forecast of -2.0 percent.
Latest data showed that government revenues in the first eight months slid by 7.67 percent to P1.93 trillion from P2.09 trillion in the same period a year ago.
State expenditures picked up by 20.79 percent to P2.67 trillion in January to August from P2.21 trillion a year earlier.
This resulted in an eight-month budget gap of P740.7 billion, 515 percent wider than the P120.4 billion in the first eight months of 2019.
Unlike other Southeast Asian economies, such as Thailand and Singapore, Fitch Solutions said “the Philippines has opted to withhold large fiscal stimulus packages while the economy remained [under] lockdown.”
Some of the fiscal stimulus, it added, were the Bayanihan to Heal as One Act; credit guarantee scheme targeting micro, small and medium sized enterprises; the Bayanihan to Recover as One Act; monetary and macroprudential easing measures; and the P300-billion government bond purchase program from the Bangko Sentral ng Pilipinas.
“[Compared] to regional peers such as Singapore and Thailand, which have announced stimulus packages amounting to around 19 percent and 10 percent of GDP, respectively, the Philippines’ stimulus packages are relatively small,” Fitch Solutions noted.
It also raised its outlook for budget deficits in the next two years: 8.3 percent and 7.1 percent of GDP in 2021 and 2022, respectively, compared with its earlier estimates of 3.5 percent and 3.0 percent.
“Our revision reflects provisional spending plans announced for the 2021 budget and a belief that the government will maintain a loose fiscal stance in the coming years due to the sharp economic downturn in 2020,” it said.
Fitch Solutions also said the proposed P4.50-trillion national budget for 2021 represented a 9.9-percent increase from its 2020 outlay, and targeted support for the healthcare system, an increased allocation of funding toward education, and continued support for the government’s “Build, Build, Build” infrastructure program.
“In addition, we expect the government to take further fiscal stimulus steps over the course of the coming quarters as uncertainty surrounding the pandemic recedes and investor appetite for risk assets picks,” it added.
Source: https://www.manilatimes.net/2020/10/02/business/business-top/fitch-unit-ph-budget-gap-at-9-3-of-gdp/775122/