Revenues seen as key risk to deficit goal
MANILA, Philippines - The Philippine's budget deficit in the 9 months to September was smaller than targeted as the government tightened spending, but analysts said persistent revenue weakness meant the full-year goal may be exceeded.
President Benigno Aquino said he did not think the peso, which has surged to 2-½ year highs this month on surging foreign inflows, would rise to 41 per US dollar this year.
The September shortfall was P31.7 billion, bringing the 9-month total to P259.8 billion, or 80% of a full-year deficit forecast of P325 billion.
If hit, the 2010 target will be a record in peso terms but as a percentage of gross domestic product (GDP), will be unchanged from 2009 at 3.9%.
"The government target of 3.9% of GDP seems a little challenging," said Sherman Chan, an economist at HSBC in Hong Kong. "Revenue collection remains the biggest hurdle in achieving their target."
The government spent P1.15 trillion in the January to September, against a planned P1.21 trillion, while revenues of P894.7 billion were P40.3 billion short of target, data showed.
The government said it was confident of meeting its deficit target.
"We believe that the disciplined approach of this administration to spending will strengthen the fiscal position moving forward," Finance Secretary Cesar Purisima told a media conference on Thursday.
Aquino, who took office in June, has said his government would curtail spending and improve revenues by enforcing existing tax laws and cracking down on tax evasion.
"Improving tax efficiency takes time, so I still expect the full-year deficit to be higher than P325 billion," said Jonathan Ravelas, chief market strategist at Banco de Oro Unibank in Manila.
Manila has been filing tax evasion and smuggling cases weekly to show it was serious about improving revenues.
The government plans to lift tax collections to 15% of GDP next year from a 5-year low of 12.8% in 2009, as part of its strategy to cut the budget deficit to 2% of GDP in 3 years.
Aquino, who toured parts of the northern Philippines hit by a typhoon this week, said he did not think the peso would reach 41 per dollar this year as forecast by a private-sector bank.
The peso, up nearly 7% so far this year, ended at 43.23 per dollar on Thursday against a previous close of 43.37.
"There has to be some stability in terms of the exchange rate," Aquino told reporters. "The 41, perhaps not this year. The 43 gives us a little bit of comfort, 43-45 level, the Bangko Sentral (central bank) is doing its job well."
Governor Amando Tetangco has said the central bank will make it easier for funds to leave the country, as a way of managing the impact of the influx of funds.