S&P projects higher Phl economic growth

MANILA, Philippines - Standard & Poor’s Ratings Services (S&P) sees the Philippines posting a stronger economic growth this year on the back of strong domestic consumption, robust remittances from Filipinos abroad, and the take off of the Aquino government’s major infrastructure program.

In a report, S&P analyst Agost Benard said that the country’s gross domestic product (GDP) would expand by 4.2 percent this year amid weak global demand.

“Given the soft external demand, we expect GDP growth of 4.2 percent this year,” Benard stressed.

The country’s GDP slackened to 3.7 percent last year from 7.6 percent in 2010 due to weak global trade and cautious spending by the Aquino government.

Benard pointed out that the start of the long-delayed public private partnership (PPP) program of the Aquino administration would boost growth this year.

“The key task for the administration is to start implementing its infrastructure development agenda. This would provide a welcome boost to growth, which is still relying heavily on domestic consumption and healthy remittance inflows, and which faces headwinds from decelerating exports,” he added.

He added that the on-going impeachment proceedings against Supreme Court chief justice Renato Corona and the hospital arrest of former President and now Pampanga Rep. Gloria Macapagal Arroyo bear some long term risks.

The S&P analyst sees the Aquino government trimming the budget deficit to 1.6 percent of GDP this year from about two percent last year.

“We expect the prevailing stability and popularity of the Aquino government to enable continued fiscal consolidation, and to kick start the long-delayed PPP initiative to develop the country’s infrastructure,” he explained.

Benard said the strengths of the Philippines include its robust external liquidity as well as resilient economic growth while weaknesses include high public sector debt stemming from narrow tax base and excessive exposure to foreign currency denominated public debt.

The New York-based credit rater has upgraded the country’s credit rating outlook to positive from stable signaling a possible upward revision in the country’s credit rating over the next 12 months.

London-based Fitch Ratings rates the country’s sovereign credit at one notch below investment grade while Moody’s Investors Service as well as S&P rate the country’s sovereign credit at two notches below investment grade.

“The positive outlook is based on our expectation that continued adherence to fiscal consolidation, combined with improved medium-term growth prospects, will further moderate the Philippines’ public debt and interest burden,” Benard added.