Fiscal position weakens as spending accelerates
From AB Capital's The Opening Bell: Three Moves
Event
The national government posted a P171.2 billion deficit in February, reversing January’s P165.4 billion surplus. While revenues rose 43.5% YoY and spending increased 25.8%, MoM revenues fell 23% as expenditures surged 75%.
View
In our view, the fiscal position is softening sequentially despite strong YoY optics. January’s surplus reflected timing factors, while February highlights underlying pressure as spending accelerates and revenue normalization sets in amid a more challenging macro backdrop.
Catalyst
Key drivers include subsidy rollout and oil prices. Elevated fuel costs could push expenditures higher through targeted support, while revenue growth may moderate. We think deficit expansion is likely as fiscal policy turns more supportive in response to the shock.
Action
We think investors should prepare for wider deficits and potential upward pressure on yields. Maintain caution on duration and rate-sensitive sectors, while favoring companies with pricing power as fiscal expansion and inflation risks begin to reinforce each other.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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