The Philippine economy will grow at its slowest pace this year since 2011 and part of the blame will be laid at President Aquino’s doorstep due to the administration’s failure to stick to spending plans in the budget.
International rating firm Moody’s Investor Service said in a report released this week that yearend numbers would show that the entire Asia-Pacific region struggled with the effects of a slowing Chinese economy.
On Tuesday, the rating firm announced cuts in its growth projections for Asia-Pacific countries. For the Philippines, the problem was more in-house rather than from outside.
“Fiscal underspending continues to be an issue,” Moody’s said. “In recent years, [the government] has pledged to channel funds into growth-enhancing infrastructure and other investment, but has repeatedly missed targets,” the firm said. Indonesia shared the same problem, the report added.
In 2015, Philippine gross domestic product (GDP), or the amount of wealth created in the Philippines, will grow by 5.7 percent. The new projection is slower than Moody’s previous forecast of an expansion of 6.7 percent.
The projection for next year was also scaled down by half a percentage point to 6 percent. In the first half of 2015, the Philippine economy grew by 5.3 percent.
According to the new projections, Moody’s said the Philippines would be Asia-Pacific’s third-fastest-growing major emerging market, behind China and Vietnam.
The problem of underspending was most pronounced this year during the January-March period, when state disbursements grew by just 4 percent. The total missed the government’s target by more than a tenth, dragging GDP expansion down to a three-year low of 5 percent.
Improvements have been made since then. In July, expenditures rose by 25 percent year on year. For the January-July period, spending was up 11 percent.
“We expect fiscal disbursements to accelerate in the second half and to see further progress on infrastructure development related to the government’s public private partnership program,” Moody’s said.
Apart from weak government spending, the Philippines would also suffer from the effects of an extended dry spell caused by the El Niño phenomenon. Farm production and the country’s power situation, which relies partly on hydroelectric plants, are expected to come under pressure.—Paolo G. Montecillo