Philippines credit rating unaffected by wider budget gap — DOF

MANILA, Philippines — A wider fiscal deficit incurred by the country in 2019 will not hurt the country’s credit rating as it provided stimulus that propelled economic growth last year, according to the Department of Finance (DOF).

In a report, Finance Undersecretary and chief economist Gil Beltran said that the 3.5 percent deficit-to-gross domestic product (GDP) ratio last year, which was higher than the ceiling of 3.2 percent, would not negatively impact the country’s credit standing.

“The rise in the national government deficit beyond the government target should not adversely affect the country’s credit rating as fiscal stimulus was needed to shore up the country’s growth to a level closer to the 6.3 percent GDP growth average for 10 years,” Beltran said.

The economy grew by 5.9 percent in 2019, slower than the previous year’s level of 6.2 percent.

According to the latest data from the Bureau of the Treasury (BTr), the government’ budget deficit amounted to P660.2 billion in 2019, which is equivalent to 3.55 percent of the country’s GDP.

This surpassed the government’s budget deficit ceiling of P620 billion for 2019, or 3.2 percent of the GDP.

The BTr said the deficit widened as government spending accelerated in the latter part of the year, pushing full-year disbursements to P3.8 trillion, 0.74 percent above the program of P3.77 trillion.

Beltran said the catch-up expenditure plan helped drive disbursements despite the delay in the approval of the 2019 budget as well as the election ban.

“Despite this development, public construction declined by 2.4 percent in constant terms, last year,” he said.

Beltran said the share of the country’s expenditures to GDP also rose to 20.4 percent, the highest expenditure effort on record.

Meanwhile, revenues in 2019 rose by 10.08 percent to P3.14 trillion from P2.85 trillion in the previous year. This was, however, 0.39 percent short of the P3.15 trillion target.