RP must stay on P200-B budget deficit ceiling
MANILA, Philippines—Amid doubts raised on the Philippine government’s ability to stay on track of its fiscal target for 2009, three investment banks said they believed the budget deficit for the year would not exceed the official ceiling.
ING, Citigroup and JP Morgan said the Philippine government was unlikely to allow the budget gap to surpass the ceiling for the year—set at 2.5 percent of the targeted gross domestic product, or nearly P200 billion.
Although the government has made pronouncements it would pump-prime the economy through aggressive spending in social services and infrastructure, the banks said the government seemed unlikely to do it to the extent of breaching the deficit ceiling.
“If correct, our view that the worst of the global downturn was behind [during the first quarter], the restrained public spending should form into a trend and keep the full-year deficit within the official target,” ING said in a paper on its latest assessment of the Philippine economy.
The Department of Finance reported this week that the government posted a P7.9-billion budget surplus in April. But for the first four months of the year, the fiscal position was at a deficit of P111.8 billion.
Critics said the four-month deficit was big that it could lead to a breaching of the full-year ceiling. But the DOF said the latest data were not worrisome, insisting that the government’s full-year deficit would stay within target.
Citigroup agreed with the DOF, although it described a P200-billion deficit as something huge. Last year, the deficit stood at only P68.1 billion.
“The single-digit surplus [in April] would momentarily disrupt the expanding deficit trend. Nonetheless, our forecast of a hefty fiscal gap close to P200 billion this year remains intact,” Citigroup said.
According to JP Morgan, the government would not spend as much as it intended if its revenue goals would not be achieved.
The Bureau of Internal Revenue, which contributes the bulk of the government’s revenues, missed its collection target in April as it collected P87.1 billion in taxes compared with its goal of P100 billion for the month.
The BIR blamed the shortfall on the economic slowdown.
JP Morgan said revenue data as of April indicated that spending could also be lower than programmed for the year. The bank said the government would only stick to its expenditure program for the year if revenue targets were also met.
“Expenditures [for the year] may run behind plan,” JP Morgan said.
The goal of limiting the deficit to about P200 billion this year assumed revenue collection of about P1.2 trillion and programmed expenditures at about P1.4 billion.