Big­ger bud­get deficit not ex­pected to hurt Philip­pines’ credit pro­file

Business World - - Front Page - By Luz Wendy T. Noble Re­porter

THE PHILIP­PINES still has room for a more ag­gres­sive fis­cal re­sponse to blunt the im­pact of the coro­n­avirus dis­ease 2019 (COVID-19) pan­demic, ac­cord­ing to credit raters who said that the ex­pected widen­ing of the bud­get deficit will not af­fect the coun­try’s credit stand­ing as long as the debt rise is tem­po­rary.

Moody’s In­vestors Service and Fitch Rat­ings have “Baa2” and “BBB” debt rat­ings for the Philip­pines — both a notch above min­i­mum in­vest­ment grade — while S&P Global Rat­ings up­graded the coun­try’s rat­ing in May last year to “BBB+”, a step short of sin­gle “A” grade.

The In­ter­na­tional Mone­tary Fund (IMF) said sep­a­rately that the coun­try has enough buf­fers to cush­ion the pan­demic’s eco­nomic im­pact.

“Fis­cal ac­com­mo­da­tion will be a key part of a multi-faceted pol­icy re­sponse to mit­i­gat­ing the eco­nomic and pub­lic health fall­out from the coro­n­avirus out­break,” Christian de Guz­man, se­nior vice-pres­i­dent at the Sov­er­eign Risk Group of Moody’s In­vestors Service, said in an emailed re­sponse on Tuesday to Busi­nessWorld’s ques­tions.

A re­cent re­port by the Na­tional Eco­nomic and De­vel­op­ment

Au­thor­ity (NEDA) said the govern­ment’s bud­get deficit could bal­loon to as much as 4.4-5.4% of gross do­mes­tic prod­uct (GDP) this year, as “ag­gres­sive ef­forts to con­tain COVID-19, in­clud­ing the Lu­zon-wide quar­an­tine, could by it­self add pres­sure on the coun­try’s fis­cal po­si­tion.”

Pres­i­dent Ro­drigo R. Duterte has signed into law a mea­sure that gives him ex­tra pow­ers to com­bat the pan­demic, in­clud­ing the abil­ity to re­align sav­ings from the 2020 bud­get of agen­cies un­der the Ex­ec­u­tive branch. Around P200 bil­lion will go to a emer­gency sub­sidy pro­gram for 18 mil­lion low-in­come house­holds for two months.

Fi­nance Secretary Car­los G. Dominguez III on Wed­nes­day said the govern­ment is look­ing to bor­row up to $2 bil­lion from mul­ti­lat­eral lenders to sup­port in­creased govern­ment spend­ing.

Mr. De Guz­man noted that bud­get deficits are not the only in­di­ca­tor to gauge a coun­try’s in­sti­tu­tional strength.

“For ex­am­ple, de­spite the widen­ing of the bud­get deficit in 2019, the govern­ment was able to record an im­prove­ment in other key met­rics, such as debt as a share of GDP (pub­lic in­debt­ed­ness) or in­ter­est pay­ments as a share of govern­ment rev­enue (debt af­ford­abil­ity),” he said.

REUTERS

A MAN wear­ing a pro­tec­tive mask sits out­side a build­ing in Makati City as the govern­ment im­ple­ments an “en­hanced com­mu­nity quar­an­tine” in Lu­zon to con­tain the coro­n­avirus pan­demic.

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