But ability to finance stimulus is, says Fitch; ’09 growth seen at just 2%
Debt watcher Fitch Ratings does not see a decline in the Philippines’ creditworthiness despite a continued global downturn but it warned that increased revenues were necessary to see the country through the crisis.
The London-based credit ratings agency, in a teleconference last night, said Asian economies in general should continue to adapt policies aimed at spurring economic growth. The region, however, should not expect to recover earlier than recession-hit Europe and the United States.
Fitch said growth in the region excluding Japan, Australia and New Zealand was expected at just 4.2% this year, down from 6.9% in 2008.
The Philippines, it said, would post an even lower 2009 growth of 2%, significantly lower than last year’s 4.6% and 2007’s three-decade high of 7.2%.
The official government target for the year is 3.7-4.7%.
A resurgence is expected to take place only in 2010 when key markets for Asian exports such as the US and Europe recover.
"Recovery in Asia is not possible without the recovery of US and Europe," said James McCormack, managing director and head of Asia sovereigns for Fitch.
"Now is not the time [for policymakers and authorities] to be complacent. There should be countercyclical measures."
Fitch currently rates Philippine sovereign debt papers "BB," or two notches below investment grade.
"Compared to other BB-rated sovereigns, the Philippines has a relatively good external payments position which will help it get through international disruptions," Mr. McCormack said.
"It will weaken but will not be a concern on its credit ratings," he added.
Fitch also said the country’s balance of payments (BoP) position could weaken this year on prospects of increased capital outflows and lower remittances, but again this would not be a ratings threat.
The central bank expects the BoP to be lower than a $2.3-billion forecast but says it will still be in surplus as investments in the tourism and business process outsourcing sectors will offset weaker remittances and outflows in foreign direct and portfolio investments.
Fitch, however, pointed to the perennial concern of limited spending capability.
"We doubt the sustainability of the Philippine government’s fiscal position if revenues are not enough. It gives limited scope for fiscal stimulus," Mr. McCormack said.
Latest data showed a government budget shortfall of P66.7 billion as of November, and officials remain confident that the full-year deficit had stayed below a P75-billion cap.
Plans of balancing the budget last year were scrapped when the global fiscal crisis worsened, and the government is now looking at a deficit of P102 billion this year as it spends more for economic pump-priming.
Fitch has said the fiscal gap could reach as high P184.9 billion this year.
The government has announced that it would this year be spending P330 billion, via various programs and initiatives, to bolster the economy. Last month, Mr. raised concerns over the state’s capability to administer the stimulus.
"There’s a question on whether the fiscal stimulus of governments would actually be spent and that includes the Philippines," he said in another teleconference.
"The reason why I mentioned the Philippines is because the government there is small. Smaller governments have less capacity to deliver stimulus programs," he said in response to a question by BusinessWorld.
"It will be difficult for the government to get all that money spent. It’s a question of logistics and people."
Government officials countered that the Arroyo administration would this year change the way project funding is released. — G. S. dela Peña