Metro Manila (CNN Philippines) — On the heels of the economy’s slower than expected year-on-year 5.2% gross domestic product (GDP) growth during the first quarter of 2015, credit watcher Fitch Ratings has retained its GDP growth forecasts at 6.3% this year and 6.2% next year.
Last quarter’s growth rate was the lowest observed since the 3.7% expansion during the last three months of 2011. Likewise, Fitch’s current predictions sit well below the government’s 7% to 8% targets for 2015 and 2016.
In its second-quarter review of Asia-Pacific Sovereigns, Fitch cited slower government spending as a cause for concern. “Fitch does not expect a significant pickup in public investment, as bottlenecks remain with respect to disbursement of public funds.”
“[A] narrow revenue base is likely to prevent a material increase in public spending,” it added.
Last March, Fitch maintained a “BBB-” sovereign rating for the Philippines. That equates to an “investment-grade” tag and a “stable” outlook for the economy.
Weak public spending has been blamed as a major cause of 2014’s missed gross domestic product (GDP) target. Last year’s GDP posted a full-year growth of 6.1%, about a notch below the government’s target range of 6.5% to 7.5%.
“Lower government spending, investment delays and slowdown, and weaker exports are likely to limit economic growth to… 6.5 percent in 2015,” the World Bank said in highlights of its Philippine Economic Update for January 2015.
“Provided that government can fully commit to utilizing the budget as planned, as well as accelerating reforms, achieving growth of above 6.5 percent can be achieved,” it added.
Last week, the Department of Budget and Management announced that as of May 31, 83.9% of the country’s P2.6 trillion budget for 2015 has been released. Similarly, 95.1% of agency allotments amounting to P1.27 trillion were released during the same period.
“With the majority of the allotments for agencies already released, we can now concentrate on improving expenditure levels across the bureaucracy. We’ve also enacted measures that would make budget execution more efficient to help us ramp up public disbursements,” Budget Secretary Florencio “Butch” Abad said in a statement.
Figures from the Department of Finance revealed that national government disbursements reached P504 billion during the first three months of the year. That’s 13% below the government’s first quarter target, but 4% higher compared to the same period last year.
