MANILA, Philippines – Moody’s Investors Service said Philippine economic growth this year may not reach the government’s “ambitious” goal without an enhanced budget implementation.
The government’s ambitious growth target may be difficult to achieve in the absence of more effective budget execution,” Moody’s said in a report published yesterday.
The domestic economy expanded by 6.1 percent last year, slower than the 7.2 percent growth in 2013 and short of the government’s 6.5 to 7.5 percent target.
Following the surprise 6.9 percent growth in the last quarter of 2014, the government vowed to accelerate public spending, which has dragged down growth especially in the third quarter.
The government hopes to grow the economy by seven to eight percent this year and the next.
“While slower public spending weighed on overall real GDP (gross domestic product) growth in 2014, the private sector has maintained a relatively rapid pace of growth,” Moody’s said.
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“In particular, the resilience of private investment portends the sustainability of higher growth relative to peers over the next two years,” the debt watcher said.
Moody’s sees Philippine economic growth to settle at 6.5 percent this year, below the government’s goal.
The Philippines enjoys a Baa2 rating with a stable outlook from the debt watcher.
“The Philippines’ institutional strength — as indicated by cross-country surveys of institutional quality — has improved in recent years. Moreover, the central bank has continued to bolster its track record of inflation management and financial stability,” Moody’s said.
The stable outlook on the country’s rating has shown that the positive economic and fiscal trends will continue in the next one to two years.
“However, these will be balanced against the persistent weaknesses in the sovereign’s credit profile. In particular, the government’s revenue — as measured against GDP — is low and debt affordability remains weak when compared to investment grade peers, although both ratios have improved in recent years,” Moody’s said.
