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A Fitch Group unit has raised its forecast for the Philippines budget deficit this year, as the 2019 coronavirus disease (Covid-19) pandemic continues to affect government revenues.
In a report Thursday, Fitch Solutions said it expected the government to post a fiscal deficit of 9.3 percent of the country’s gross domestic product (GDP) in 2020, wider than its previous estimate of 8 percent.
Its most recent outlook is also broader than 3.2 percent in 2019, but narrower than the official government assumption of 9.6 percent.
Fitch Solutions said its forecast was due to “deteriorating revenue prospects based on our revised growth outlook.” It now forecasts the Philippine economy to contract 9.1 percent from its previous forecast of -2.0 percent.
The most recent data showed that government revenue in the first eight months fell 7.67 percent to P1.93 trillion from P2.09 trillion in the same period a year ago.
State spending increased 20.79 percent to P2.67 trillion in January through August from P2.21 trillion a year earlier.
This resulted in an eight-month budget gap of P740.7 billion, 515 percent wider than the P120.4 billion in the first eight months of 2019.
Unlike other Southeast Asian economies such as Thailand and Singapore, Fitch Solutions said that “The Philippines has chosen to retain large fiscal stimulus packages while the economy remains [under] emergency shutdown. “
Some of the fiscal stimuli, he added, were the Bayanihan to heal as a single act; credit guarantee scheme aimed at micro, small and medium enterprises; the Bayanihan to recover as an act; monetary and macroprudential easing measures; and Bangko Sentral ng Pilipinas’ P300 billion government bond purchase program.
“[Compared] for regional peers like Singapore and Thailand, which have announced stimulus packages amounting to around 19% and 10% of GDP, respectively, the Philippines’ stimulus packages are relatively small, ”Fitch Solutions noted.
It also raised its budget deficit outlook over the next two years: 8.3 percent and 7.1 percent of GDP in 2021 and 2022, respectively, compared to its previous estimates of 3.5 percent and 3.0 percent. hundred.
“Our review reflects the interim spending plans announced for the 2021 budget and the belief that the government will maintain a relaxed fiscal stance in the coming years due to the strong economic recession in 2020,” he said.
Fitch Solutions also said that the proposed P4.50 trillion national budget for 2021 represented a 9.9 percent increase from its 2020 disbursement, and targeted support for the healthcare system, increased funding allocation for education, and continued support. for the government “Build, Build, Build” infrastructure program.
“Furthermore, we expect the government to take further fiscal stimulus measures over the course of the next few quarters as the uncertainty surrounding the pandemic recedes and investors’ appetite for risk asset selection,” he added.
