Timely approval of 2020 budget credit positive for Philippines — Moody’s

MANILA, Philippines — Moody’s Investors Service said the timely passage of the 2020 national budget would help sustain the rapid economic growth of the Philippines against an uncertain global backdrop.

Christian de Guzman, senior vice president at Moody’s, said the signing into law of the P4.1-trillion budget last Jan. 6 is credit positive for the Philippines.

De Guzman said the economy is expected to grow by 6.2 percent this year, lower than the six to 6.5 percent target set by economic managers.

For 2020, economic managers expect a GDP expansion of between 6.5 and 7.5 percent.

“We expect the pace of government spending to normalize and, along with residual spending from the 2019 budget, support a significantly larger fiscal expansion in 2020,” De Guzman said.

Part of the support to growth, he said, would come from budget implementation over the course of a full year.

“Despite our expectation of a significant pickup in budgeted spending and a consequently wider fiscal deficit, we project underlying strengthening in Philippine fiscal metrics because of ongoing structural increases in revenue from tax reform,” de Guzman said.

He said the revenue would be enhanced this year by scheduled increases in excise taxes, some of which were part of the Duterte administration’s first package of tax reforms passed in 2017.

“In addition, a 2018 law raised duties on tobacco products. We expect national government debt to remain stable and debt affordability to improve,” he said.