Philippines balances sound fundamentals against risks, Moody’s says

DUBAI: Moody’s Investors Service on Friday said that the Philippines’ credit profile balances sound economic and fiscal fundamentals against structural challenges to competitiveness and rising political risks.
The ratings agency, in a recently-released annual credit analysis, expects the Southeast Asian nation to sustain its robust economic growth over the next few years, boosted by the government’s focus on infrastructure development, buoyant private sector investment and the recovery in external demand.
“We project real GDP growth to be broadly stable in the remainder of 2017 and to average 6.5 percent for the year as a whole, which is at the lower end of the government’s forecast range of 6.5 percent and 7.5 percent,” Moody’s said.
An interagency panel headed by Philippine President Rodrigo Duterte this week approved four major infrastructure projects worth $7.59 billion, including bridges, roads and the country’s first subway.
The current administration plans to spend $175.7 billion over the next five years for its ambitious Build, Build, Build program on what it calls the Golden Age of Infrastructure. Moody’s however believes the government will pare back its infrastructure spending plan pending passage of the Philippine tax reform legislation.
“We have also retained our projection for 2018 at 6.8 percent, below the government’s target of 7 percent and 8 percent given continued uncertainties regarding the proposed comprehensive tax reform program, which is currently being considered by the upper house of Congress,” Moody’s said.
“Strong GDP growth could accelerate even further, especially if the government achieves higher investment spending.”
Moody’s however cautioned that the worsening Islamist insurgency in Mindanao, which could lead to an expansion of martial law, may undermine both foreign and domestic business confidence and disrupt economic activity in other parts of the country.