Fiscal room improves, but spending test remains

From AB Capital's The Opening Bell: Three Moves

Event

The national government posted a P31.4 billion surplus in April, down 53% YoY, as spending rose 11.1% while revenues grew only 2.8%. The weaker revenue print partly reflected the extension of annual income tax filing to May.

View

In our view, the fiscal picture is better read through the four-month deficit, which narrowed 14.4% to P324.1 billion. This gives government room to accelerate spending, but it also reflects earlier underspending that likely contributed to weak 1Q GDP.

Catalyst

Key sensitivities include May tax collections, infrastructure catch-up, and interest payments. If disbursements accelerate in 2H26, growth should receive support, but deficits may widen. Higher rates and Php weakness could also lift interest costs and funding needs.

Action

We think the market will focus on spending quality rather than the April surplus itself. Faster infra and priority program rollout would support growth-sensitive sectors, while weak execution keeps our bias defensive and favors utilities and staples.

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.