Economic Analysis - Government's Focus On Infrastructure Upgrade Positive For Growth - NOV 2017

BMI View: The Philippine government has proposed a PHP3.77trn budget for 2018, which marks a 12.4% increase from 2017. Although the projected targets seem overly-ambitious, we believe that the government's focus on infrastructure and education spending will be supportive of growth over the short and long term.

Philippine President Rodrigo Duterte certified the proposed PHP3.77trn budget for 2018 as an urgent matter on September 12, which will allow Congress to expedite its enactment. If passed, the budget would be 12.4% larger than the 2017 budget of PHP3.35trn, will result in a budget deficit of 3.0% of GDP, and account for 21.6% of 2018's GDP, according to the government estimates. Although we regard the fiscal plan as overly ambitious, with the government likely to miss both its revenue and expenditure targets, we expect the government's focus on improving infrastructure and education to be supportive of growth over the short and long term. We forecast the Philippines' fiscal deficit as a share of GDP to widen slightly to 2.9% in 2018, from a projected 2.7% in 2017, with revenue and expenditure as a share of GDP likely to reach 15.5% and 18.4%, respectively.

Focusing On Education And Infrastructure

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