Philippines budget deficit swells further

MANILA, April 22 (Reuters) – The Philippines budget deficit almost tripled in March from a year earlier as the government ramped up spending to overcome the global downturn that is squeezing revenues, officials said on Wednesday. Finance Secretary Margarito Teves told reporters customs revenues were lower last month on sluggish imports and tax collections from stock market transactions declined.

The fiscal shortfall for the first three months of the year reached 119.7 billion pesos (about $2.5 billion), nearly two-thirds of the government's full-year 2009 deficit estimate.  This is also more than double than the P51.6 billion ($1 billion) deficit posted in the same period last year — due to lower tax collection and higher government expenditures.

The actual first quarter deficit surpassed the targeted P110.1 billion (about $2.3 billion) for the first three months of 2009.

KEY DATA: (all in billion pesos)


  2009 2008 2009 2008
Budget Balance -52.6 -18.6 -119.7 -51.6
Revenues 75.9 84.8 235.4 253.5
Internal Revenue 52.1 59 154.8 166
Bureau of Customs 14.9 18.5 43.1 48.9
Bureau of Treasury 3.8 3.9 20.7 17.1
Other Offices 5.1 3.3 16.8 21
Expenditures 128.6 103.4 355 305.1

NICHOLAS BIBBY, REGIONAL ECONOMIST, BARCLAYS CAPITAL says that 'There should be a bit of improvement coming through, because you do see surpluses coming in May with tax collections and things like that. 'The problem really is with the revenue collections, certainly the January-February numbers were very soft even looking through the revised numbers.

On the expenditure side, the government is frontloading a lot of the spending. 'If we do see an improved economy through the second half of the year, the government may be able to scale back some of the spending in order to meet the target but certainly there is a risk that we could see the target being breached. I would say 3 percent of GDP (under a worst case scenario).'

MARKET REACTION: – The yield on the 5-year bonds slid 2 basis points to 6.13 percent just before noon break, traders say. – The peso was quoted at 48.52 per dollar at midday against its close at 48.46 on Tuesday. –

The stock market closed higher 1.17 percent at 2,073.31 points mimicking Wall Street's overnight performance, but not yet in reaction to this budget deficit news.

BACKGROUND: – The Philippines last week widened its 2009 budget deficit forecast to 199.2 billion pesos or 2.5 percent of GDP from the previous estimate of 177 billion pesos, or 2.2 percent of GDP on weaker state revenues and as the government spends more to stimulate the economy
– The fiscal shortfall in 2008 was 68.1 billion pesos, or 0.9 percent of GDP.
– The government expects next year's budget deficit to reach 173 billion pesos or 2.0 percent of GDP.
– It aims to borrow 463.1 billion pesos from the domestic debt market this year, 21 billion pesos more from a previous plan of 442 billion pesos, to fund a larger fiscal deficit.
– The economy is projected to grow 3.1-4.1 percent this year, lower than a previous 3.7-4.4 percent estimate, forcing the government to cut the 2009 revenue target of the country's main tax agency BIR by 15 billion pesos to 850.6 billion pesos.
– The government, which spends about 24 percent of its budget on interest payments on about $87 billion in foreign and domestic debt, relies heavily on local and foreign borrowings to fund its deficit and redeem maturing debt.

The Philippine government is offering a P330-billion (about $7 billion) stimulus package this year. Given the increased public spending, Philippine economic managers project that this year's fiscal deficit to reach P199.2 billion ( about $4.2 billion). This is equivalent to 2.5 percent of the country's gross domestic products.


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