• Philippine Resources

Fitch unit sees slowdown in Philippines infrastructure growth

Lower disbursements and budget due to the coronavirus disease 2019 or COVID-19 pandemic may dent the growth prospects of the country’s infrastructure sector this year, according to Fitch Solutions Country Risk & Industry Research.

In a report, the research arm of the Fitch Group said the country’s infrastructure sector may grow by 3.2 percent this year, slower than the previous forecast of 5.4 percent.

Fitch Solutions said the construction sector is also expected to expand at a slower pace of 2.9 percent compared to the original target of 3.6 percent this year, while the buildings sector growth remains unchanged at 2.8 percent.

“Risks to our forecast remains significantly weighted to the downside, given uncertainty with regards to the duration of the COVID-19 outbreak within the Philippines and globally,” it said.

Fitch Solutions said further reductions to infrastructure disbursements and budgets this year are still possible as the Philippines is still fighting to limit the spread of the coronavirus disease 2019 or COVID-19 outbreak.

The Development Budget Coordination Committee (DBCC) announced earlier a 45 percent rise in its planned infrastructure disbursements, including under the Build Build Build program to P1.13 trillion for 2021.

“We have chosen to hold our forecast for 2021 at real growth of 8.5 percent, given that further changes to the budget could be made over the course of the year given the highly uncertain impact of COVID-19 on the economy,” it said.

Fitch Solutions said the BBB program is also reliant on private and foreign investments for funding, a slowdown in the global economy could result in a decrease in the amount of foreign direct investments into the infrastructure sector.

“Our country risk team now expects foreign direct investments to fall in 2020, and BBB projects could bear the brunt if COVID-19 continues to worsen globally,” it said.

The DBCC had initially proposed to reduce projected capital outlays by three percent to P775.1 billion from P800.6 billion despite the government’s commitment to utilize infrastructure development as a key strategy to boost economic activity following the health pandemic.

The budget of the Department of Public Works and Highways (DPWH) was reduced to P457.9 billion instead of P580.9 billion, while that of the Department of Transportation (DOTr) was cut to P90.5 billion from P99.4 billion.

“We note that DPWH and DOTr were not the only departments to suffer a reduction in budget – many other departments such as the Department of Education, Department of Agriculture and the Department of Information and Communications Technology all had their budgets reduced and reallocated to support the government’s response to the COVID-19 outbreak, in accordance with the Bayanihan to Heal as One Act,” it said.

Source: https://www.philstar.com/business/2020/06/16/2021127/fitch-unit-sees-slowdown-philippines-infrastructure-growth


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