Last Monday, Rating and Investment Information, Inc. (R&I), a Japan-based debt watcher, affirmed the Philippines’ investor-grade credit rating at “BBB+” and revised its outlook from stable to positive. The Finance department attributed this good news “to the country’s robust macroeconomic fundamentals, improving fiscal position, sound banking system, comfortable external payments position, and stable political environment,” explaining that “A ‘BBB+’ rating is two ranks higher than the minimum investment grade and just one notch below the ‘A-’ rating.”
On May 22, the Philippines also earned a ratings upgrade from Fitch, with the outlook moved from “negative” to “stable.” The Philippines’ rating remains at “BBB,” considered “investment grade” and above the “speculative grade” of D to BB. A “BBB stable” means the risk of loan default is low and that the country’s ability to pay its financial obligations is high.
I created a table comparing the ratings of major East and South Asian economies from four ratings agencies. The Philippines is within striking distance of an “A” under R&I and “BBB+” under Fitch and, hence, will be in a comparable ratings position as Thailand, and might even be at the position of Malaysia (see Table 1).
Today, Thursday, the Philippine Statistics Authority will release the GDP figures for the 2nd quarter (Q2) of 2023. This column was written yesterday, Wednesday, and, not having seen the date yet, this columnist initially predicted that it would show around 6.4% growth in Q2 — but considering that the electricity demand data for Q2, among other factors, is not that high, I project growth of 6% instead.
The average GDP growth in Q1 and Q2 of 2023 in East Asia were as follows: South Korea 0.9%, Singapore 0.6%, Taiwan -0.7%, Hong Kong 2.2% (but in 2022 it was -3.5%), China 5.4%, Indonesia 5.1%, and Vietnam 3.7%.
After the Philippines’s Q1 growth of 6.4%, if Q2 growth is 6%, then the Q1 and Q2 average growth will be 6.2%. If Q2 growth is only 5.6%, then the average will be 6%. Either way, the Philippines will remain the fastest growing economy in East Asia, if not among the top 50 biggest economies in the world.
This might prompt the other ratings agencies — S&P, Fitch, and Moody’s — to consider another upgrade for the Philippines.
RISING BUDGETS FOR UNIVERSITIES
Meanwhile, many state universities and colleges (SUCs) will receive bigger budgets from the National Government (NG). The budget for public elementary and secondary education also keeps rising, and university personnel and students are supposed to be mature enough to generate revenues other than asking for more money from taxpayers. So I build this table on SUCs receipts or income and expenditures.
The good thing is that SUCs’ internally generated (IG) income is rising — from P55 billion in 2019 to P78 billion in 2022, and projected to reach P84 billion next year.
But the National Government’s appropriation for the University of the Philippines (UP) and all its campuses nationwide, plus the Philippine General Hospital (PGH) in UP Manila, is not rising fast, going from P19 billion in 2019 to P30 billion in 2022, but going down to P23 billion next year.
To make sense of these numbers, I computed the ratio of IG receipts (IG + beginning balance or carry over from last year) over NG appropriation plus the ending balance. The result shows an average from 2019-2024 of 50.5% for all SUCs and 44.4% for UP system (see Table 2).
I believe that the law on Universal tertiary education — or simply the free-tuition law (RA 10931, August 2017) — is wrong. People are not getting poorer (for instance, the Philippines’ GDP growth 2012-2017 average was 6.7%), so lawmakers are only raising peoples’ expectations of more freebies from the state.
Government — Congress, the SUCs themselves, the Commission on Higher Education, and local governments — should begin to wean SUCs away from high funding. One scheme is to raise the IG/(appropriations+ending balance) ratio from the current 50% to, say, 55% by 2030, 60% by 2040, and so on. The same trend should apply to UP.
People should assume more personal and parental responsibility for their own lives and households, and not expect more government responsibility which actually means more government taxes to fund such expanded freebies. Besides, there is a double standard in the treatment of Filipino students — those in private universities are not subsidized even if they and their parents are also taxpayers.
REUNION NEWS
The UP School of Economics’ Program in Development Economics (PDE) alumni reunion on Aug. 19, Saturday, at the school auditorium will have two PDE alumni, Finance Secretary Benjamin Diokno (7th batch) and Budget Secretary Amenah Pangandaman (33rd batch) as guest speakers.
The lecture at 4 p.m. will be open to the public plus media. The alumni reunion in the latter part will be exclusive to PDE graduates. While there is no registration fee, there are plenty of raffle prizes and giveaways, courtesy of our corporate sponsors and donors.
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BWorld 626, Debt service, sustained growth, and the PDE alumni homecoming, August 18, 2023
BWorld 627, Energy at SONA 2023 and electric cooperatives, August 23, 2024.
BWorld 628, Inflation deceleration, G7 deindustrialization, and deficit reduction, August 24, 2023.
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