Macro Research from Fitch Solutions expects the Philippines to incur a wider budget deficit next year. The 2020 national budget may support President Duterte’s aspirations to transform the country into an upper-middle-income economy.
Fitch Solutions said PH may suffer a wider budget shortfall of 3.5% of Gross Domestic Product for the year 2020.
“We anticipate the Philippines to run a wider budget deficit in 2020 than in 2019, owing to a greater reliance on government stimulus to drive economic growth,” Fitch Solutions said.
According to Fitch Solutions, the higher shortfall is caused by a greater reliance on government stimulus to drive economic growth.
“Despite the fiscal stimulus, the government’s fiscal position faces fairly low risk over the near term and we even see scope for further stimulus were the economy to face more severe headwinds in 2020,” Fitch Solutions added.
The country’s budget deficit clocked in at 2.3% of GDP in the second quarter which was slightly lower than the 2.4% of GDP recorded in the same period in 2018.
“The narrower budget balance in the first half is attributed to strong revenue generation and delayed expenditure by the government, following the protracted process in passing the 2019 budget,” Fitch Solutions stated.
For the year 2019, Fitch Solutions may expect a lower budget deficit of 2.8% of GDP from the original target deficit of 3% of GDP.
“We expect expenditure to slightly undershoot the P3.66 trillion allocated budget given a likely increase in expenditure only in late 2019,” Fitch Solutions said.
“However, the P4.1 trillion planned budget for 2020 will be close to fully allocated, and will represent closer to a 12.8 percent increase in expenditure rather than the government’s projection of 12 percent, given the lower than planned 2019 expenditure,” Fitch Solutions concluded.
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