ING analyst warns poor fiscal performance may raise doubts over PH growth prospects
A sharp slowdown in the country’s economic activity in recent months has led to downward revisions to many private business forecasts, and a lot now depends on how well the government executes its fiscal program during the rest of the year to step up growth and make up for lost momentum.
Pointing out the shortfall in the government’s delivery of economic growth in the first four months of the year, a senior economist at ING Bank said much of the work to put the economy back on the fast lane now lies with the government’s spending program.
Joey Cuyegkeng added a word of caution in his latest commentary for ING: “A poor fiscal performance report would raise concerns about the economy’s growth prospects and corporate earnings prospects and result in continued net foreign selling on the stock market.”
“April exports disappointed with a 4.1 percent year-on-year contraction rather than the consensus forecast of an 8 percent year-on-year gain. In addition, April volume of production and value of production indices contracted and slowed significantly, respectively,” he pointed out.
The government is programmed to earn P2.275 trillion in 2015, while keeping a budget deficit cap at 2 percent of the country’s gross domestic product (GDP). GDP this year is targeted to grow 7 percent to 8 percent.
In the first three months of this year, however, the fiscal deficit fell far short of what might be considered healthy. The government posted a deficit of P33.51 billion, narrower by P50.60 billion from a gap of P84.12 billion posted a year earlier.
The January to March budget deficit was also 66 percent below the P98.1 billion ceiling set for the period.
Total revenue by end-March 2015 was up 18 percent or P72.11 billion year-on-year at P470.53 billion, while disbursements by the national government rose by only 4 percent or P21.5 billion to P504.04 billion.
As a result of slow government spending and weak net exports, gross domestic product (GDP) grew at its slowest pace in more than three years of 5.2 percent during the quarter.
BSP, IMF also bank hopes on govt fiscal program
Cuyegkeng noted that the Bangko Sentral ng Pilipinas (BSP), as well as the International Monetary Fund (IMF), are also assuming the government would execute its 2015 fiscal program efficiently to spur economic activity.
The “BSP and the IMF find no compelling reason [for the central bank]to shift its monetary policy from neutral to accommodative. Headline inflation in the near term is likely to ease further. The impact of the dry spell on agriculture production is limited so far,” Cuyegkeng noted.
Such factors, together with volatile global oil prices, keep the BSP from implementing monetary easing, he explained.
The Department of Finance is scheduled to release the government’s April fiscal performance on Thursday.