"The government's policies have been broadly effective at promoting growth," S and P Sovereign and International Public Finance Ratings Director Kyran Curry said in an e-mail, when asked about the country's fiscal performance in 2015.
The national government incurred a budget deficit of P121.7 billion, equivalent to 0.9% of the gross domestic product (GDP), according to data released by the Bureau of the Treasury on March 17.
The interagency Development Budget Coordination Committee programmed a budget deficit of P283.7 billion, equivalent to 2% of GDP, to support the economy's expansion by 7%-8% that year.
The lower-than-expected budget shortfall -- relative to the deficit ceiling -- reflects slow government spending. State expenditure totaled P2.231 trillion, 13% short of the P2.559 trillion programmed for 2015.
From the perspective of credit rating agencies -- which gauges sovereign creditworthiness with metrics such as the debt-to-GDP ratio -- small deficits may prove beneficial for the Philippines.
S and P, in particular, cited as a "key strength" the low external debt burden of the Philippines, which currently maintains an investment grade of "BBB" with a "stable outlook" from the debt watcher.
"This, combined with its strong external position and a sound and stable banking system, offset a number of constraints on the ratings. These include the Philippines' low income and a developing institutional and governance framework," Mr. Curry said.
S and P views President Benigno S. C. Aquino III as having a "sound record" committed to keeping fiscal deficits and the debt stock moderate, Mr. Curry noted.
"We expect these policies, as well as efforts to improve the business environment, to broadly continue in the final months of Aquino presidency."
Nevertheless, S and P noted the importance of closing the country's infrastructure gap, mainly in transportation and energy, in facilitating the Philippine economy's growth.
"Without the closure of infrastructure gaps and improvements in the business climate through regulatory reforms, the Philippines may not achieve lower-middle-income status in 2016, where per capita GDP exceeds $3,000," Mr. Curry said.
The government has earmarked P760 billion, equivalent to 5% of GDP, for infrastructure spending this year, a marked improvement from the P165 billion programmed in 2010.
The "substantial increase" of investment in public infrastructure this year will "ensure" the Philippines will keep its investment grades and sustain a strong growth performance, according to the Department of Budget and Management.
"While we have made great strides in infrastructure development over the past six years, we're actively seeking out ways to spend more efficiently," Budget Secretary Florencio B. Abad said in a statement released yesterday.
The uncertain conditions in export markets further add downside risk to the growth outlook of S and P for the Philippines, Mr. Curry said.
On the other hand, household consumption, investment and exports mainly of electronics, commodities and services continue to serve as main driver of economic activity in the Philippines.
"These strengths will likely be underpinned by strong household and company balance sheets, sound growth in jobs and income, high inward remittance flows, and an adequately performing financial system," Mr. Curry said.
In a report released yesterday, economists from Standard Chartered Bank also cited how the country's services exports, domestic growth and space for fiscal support could cushion external headwinds and allow the economy to outperform other Asian economies this year.
The "second-round effects" of government spending may further boost investment and household consumption this year, with the government's public-private partnership model for undertaking infrastructure projects looking set to continue beyond the current administration.
"Our 5.7% growth forecast for 2016 (versus 5.8% in 2015) is cautious, as the economy still has to overcome several obstacles," Standard Chartered economists Jeff Ng and Edward Lee noted in the report, called "What to expect in a stagnating world."