RP budget swings into deficit amid increased spending
Reuters | 12/19/2008 1:30 PM
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The government said on Friday it had a budget deficit of P4.3 billion ($91.66 million) in November as it quickened spending on infrastructure and social services to cushion the economy from the global financial crisis.
The latest data brings the government's budget deficit in the first 11 months of the year to P66.7 billion, against a P12.6 billion surplus in the same period of 2007.
Despite higher spending in recent months, the government looks set to keep its budget deficit this year within its goal of P75 billion or 1 percent of gross domestic product, after its $524 million divestment this month from oil refiner Petron Corp.
The government posted a surplus of P54.1 billion in November 2007, the month it booked proceeds from the sale of a majority stake in geothermal energy firm Energy Development Corp.
Finance Secretary Margarito Teves told reporters the government was on course to keeping the deficit within the targeted P75 billion for the full 2008 year.
Christy Tan, currency strategist at Bank of America in Singapore, said, "This (deficit) affirms that the government is stepping up spending, and I agree that the government will be able to keep within its P75 billion deficit projection."
David Cohen, director for economic forecasting at Action Economics, said "I imagine that the weakening economic backdrop will make it a little more difficult for the budget in 2009...The economic growth is going to slow and that will impact the tax revenue."
However, Vishnu Varathan, economist at Forecastweb in Singapore, explained that that the fiscal slippage "will not do the credit profile of the Philippines any favours."
The Philippines expects its 2008 budget deficit to be within a target of P75 billion, or 1 percent of gross domestic product, but the shortfall will rise to as much as P102 billion next year on lower revenues as the economy slows.
Manila sold its 40 percent stake in oil refiner Petron Corp. earlier this month for P25.7 billion to British investment firm Ashmore Group, raising the possibility it would stay within its 2008 fiscal shortfall goal.
The International Monetary Fund projects a higher budget deficit of P140 billion, or 1.7 percent of GDP, for the Philippines in 2009.
The government has said it would be difficult to balance its budget by 2010 as planned because of the global financial crisis. Socioeconomic planning Secretary Ralph Recto has said he expects Manila to incur a budget deficit of 0.5 percent of GDP in 2010.
The government has postponed the sale of a portion of its holdings in oil-and-gas explorer PNOC Exploration Corp to next year because of volatile markets.
Varathan noted that "The divestment of assets which was helping support headline budget numbers was never a sustainable solution, and now has been impaired by conditions in the global markets, deleveraging and all."
The government, which spends about 24 percent of its budget on interest payments on about $84 billion in foreign and domestic debt, relies heavily on local and foreign borrowings to fund its deficit and redeem maturing debt.
"The ubiquitous fiscal stimulus motive globally could also translate into higher funding costs in international debt markets," Varathan noted.
The peso was quoted at 46.91 per dollar in mid-morning trade against its close at 46.76 on Thursday.
The local stock market closed up 0.11 percent.
