Incoming administration needs to ensure ‘investment efficiency’ — Fitch - BusinessWorld Online

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A continued focus on infrastructure under the next administration will help drive post-pandemic growth recovery, but the next administration should ensure it will continue governance standards and debt management, Fitch Ratings said. READ:

Under a government led by Ferdinand R. Marcos, Jr., investments that will address infrastructure gap in the Philippines could help offset pandemic scarring on the economy, the debt watcher said in a note on Thursday.

“Poorly managed public infrastructure investment could also contribute to government debt rising faster than nominal gross domestic product over the medium term, which would pressure the sovereign rating,” it added. This is already beyond the 60% threshold considered as manageable by multilateral lenders for developing economies.

“Poor execution could lead to underspending by local governments. If this adversely affects medium-term growth potential, the net credit effects are likely to be negative, even though public finances may improve in the near term,” Fitch said. “The low tax take is a credit weakness for the Philippines, and when we affirmed the rating in February, we noted that a reversal of tax reforms that leads to sustained higher fiscal deficits could result in a rating downgrade,” it said.Meanwhile, economists said foreign investor confidence in the Philippines may remain shaky due to high debt, elevated inflation and uncertainty arising from Mr. Marcos’ lack of clear economic policies.

“Given the budget constraints we face and the complete silence in all these issues, the efficient allocation of these public goods is unlikely to be accomplished, and the administration will likely repeat the past mistakes. Even the indicated continuity of the Duterte programs is not clear,” Mr. Lanzona said.

 

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