EIU sees RP debt payment capability to remain stable

The Economist Intelligence Unit (EIU) is expecting the country’s debt payment capability to remain "stable" in the next 18 months due in part to recent progress in reducing the government’s budget deficit.

"On the Philippine sovereign risk, payment difficulties are not in prospect over the next 18 months, partly because of recent progress on reducing the fiscal deficit," the EIU said, in its latest risk assessment on the Philippines.

In the past three months, the government had been posting budget surpluses due to strong revenue collections and lower spending.

The government recorded a budget surplus of P12.7 billion in June, a sharp improvement from the P5.8-billion surplus recorded in May.

The EIU, in reviewing the country’s economic risk, said "the government needs to spend more to improve the country’s infrastructure, which would encourage greater investment."

But the London-based economic think-tank recognized that there are some fiscal issues that would prevent the government from spending more. "So long as the fiscal deficit remains a concern, this will not be possible," it said.

On the currency risk, it said the peso is expected to stabilize against the dollar over the remainder of the forecast period despite the recent weakness of the local currency.

According to EIU the issue on impeachment will put more political risk on the country. "Political tensions remains high, after the government declared a state of emergency in February. Congress is discussing options for constitutional reform, and the opposition has launched an impeachment motion against the president," it said.

The banking sector, EIU said, on the other hand, warned against the quality of bank lending.