Philippines facing headwinds from public underspending

MANILA – ANZ Bank has downgraded its Philippine full year growth outlook to 6.2% y/y for 2014 (from 6.9%) and now expects growth to rise to 6.3% in 2015 (down from 6.8%). Despite the forecast revision, however, ANZ believes the Philippines will remain one of the region’s  fastest growing economies in 2014-2015.

The budget deficit continues to narrow significantly implying that infrastructure spending may miss our expectations”, ANZ says. The substantial pullback in public spending is surprising, especially after the credit rating upgrades to investment grade in 2013 and the typhoon reconstruction.
“”The declining growth in infrastructure spending is putting a dampener on investment growth. The heightened media coverage on corruption regarding Pres. Aquino’s Disbursement Acceleration Programme has pushed the government to step on the brakes on public spending.

Since January this year, major government agencies have been posting lower than programmed disbursements. Since then, local sentiment has deteriorated. With less than 18 months left of the Aquino administration, the lack of clarity on political succession will likely limit the President’s ability to pass necessary reforms.”  www.live.anz.com (ATI).