“We expect robust economic growth to be sustained over the next few years, aided by the government’s focus on infrastructure development, buoyant private sector investment, and the recovery in external demand,” Moody’s said in a statement yesterday.

For this year, Moody’s projected gross domestic product growth to remain “broadly stable” in the coming months to settle at 6.5 per cent or at the lower end of the government’s 6.5-7.5-per-cent target range.

“We have also retained our projection for 2018 at 6.8 per cent, below the government’s target of 7-8 per cent, given continued uncertainties regarding the proposed comprehensive tax reform programme (CTRP), which is currently being considered by the upper house of Congress,” Moody’s said.

The first CTRP package pending at the Senate will cut personal income tax rates while jacking up taxes on consumption. Moody’s deemed that “in the absence of a significant boost to government revenues from the passage of the CTRP, the government will likely pare back its plan to aggressively increase its spending on infrastructure”, referring to the ambitious “Build, Build, Build” programme aimed at ushering in a “golden age of infrastructure”.

Under “Build, Build, Build”, the government will roll out 75 flagship, “game-changing” infrastructure projects to be started and finished in six years, in line with the plan to spend up to 9 trillion pesos (Bt5.8 trillion) on hard and modern infrastructure until 2022.

The Duterte administration had programmed a yearly budget deficit equivalent to 3 per cent of GDP up to 2022, but Moody’s said this was not a cause for concern as “ongoing debt consolidation and improving debt affordability give the government fiscal space to accommodate higher infrastructure spending and wider budget deficits”.

“Further improvement in fiscal metrics will largely depend on whether the proposed tax reforms can effectively bolster revenue generation.

“Administrative reforms have led to higher government revenue in recent years, but revenue remains low as a share of GDP compared to peers, which in turn constrains room for greater spending,” Moody’s said.

The Philippines’ fiscal strength “remains weak compared to similarly rated peers”.

Besides the delay in the passage of the first CTRP package, Moody’s warned that another downside risk was “a worsening of the Islamist insurgency in Mindanao that could lead to an expansion of martial law, undermine both foreign and domestic business confidence, and disrupt economic activity in other parts of the country”.