(UPDATE) Fiscal deficit widens as govt spends more on social services
JUDITH BALEA, abs-cbnNEWS.com | 10/20/2008 3:43 PM
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National government incurred fiscal deficit of P53.4 billion from January to September as spending surged under government plans to spur growth to shield the economy from the global financial crisis, finance secretary Margarito Teves said in a press briefing Monday.
Higher than expected spending and lower revenues led to a P21.6 billion fiscal deficit in September, bringing the first nine months deficit higher by P18.2 billion over the programmed P35.1 billion ceiling.
Total revenues in the first nine months reached P879.9 billion, falling short by P14.1 billion against the collection goal of P894 billion.
Total expenditures for the first nine months amounted to P933.3 billion with higher spending for social services and infrastructure.
"We need to spend because of circumstances today," Teves said, referring to the global economic slowdown.
"We need to spend more on infrastructure and social services to help our people generate more jobs," Teves added.
Apart from higher public spending, Bureau of Internal Revenue deputy commissioner Nelson Aspe, blamed the widened deficit to the increase in personal exemption of all taxpayers. He noted the government lost about P3 billion in revenues monthly since July, when the mandate became effective.
Last year, the government reported a budget deficit of P14.5 billion in September and a deficit of 40 billion pesos in January to September.
The government expects growth this year to brake to 4.4 to 4.9 percent against a previous target of 5.5 to 6.4 percent as the global credit crisis dampens demand for the country's exports.
About 24 percent of the national budgest is set aside for interest payments on about $84 billion in foreign and domestic debt. The government relies heavily on local and foreign borrowings to fund its deficit and redeem maturing debt.
The target this year is a budget deficit of P75 billion against a 2007 shortfall of P12.4 billion.
The sale of government's 40 percent stake in oil refiner Petron Corp and a portion of its holding in oil and gas explorer PNOC Exploration Corp before the year ends is expected to raise about P42 to P44 billion additional revenues for the government.
However, offsetting lower tax collections with sale of government assets still concerns analysts and economists.
Jonathan Ravelas, Banco de Oro chief marketing strategist noted that "There is fiscal prudence but the quest for recurring revenues continues. We need more taxes if they really need to balance the budget in 2010."
Nicholas Bibby, regional economist and strategist of Barclays Capital, agreed and noted that "The government includes privatisation receipts. Under international norms you would normally strip them out."
Nonetheless, Jose Mario Cuyegkeng, economist at the ING Bank in Manila, agreed that the government needs to pour resources in areas that spur growth.
"Spending...should be okay for growth, if government is really spending and creating jobs. Job creation is very important, otherwise growth in private consumption spending will remain modest," he said. -- with Reuters, ABS-CBN Business
