Balancing the budget left to Arroyo's successor

MANILA, Philippines - The task of balancing the budget will be left to the next administration as the Arroyo government, looking to spur the economy via increased spending, plans to bow out with a P132.1-billion deficit in 2010. Officially the government is still maintaining a balanced budget target for next year but Finance Undersecretary Gil S. Beltran told legislators yesterday that the interagency Development Budget Coordination Committee (DBCC), in revising this year’s macroeconomic targets, had also decided on a 2010 shortfall. “For 2010 we have projected a deficit of 1.5 percent of GDP (gross domestic product)," Mr. Beltran said. “That is around P132.1 billion ... This was agreed upon during the last meeting of the DBCC." Mr. Beltran said economic pump-priming activities as well as expectations of lower revenues were behind the decision to keep operating in the red. “That (greater spending for infrastructure and social services) is part of it ... We adjust automatically ... [using] the latest macroeconomic assumptions," he said. Mr. Beltran said a balanced budget could be achieved by 2011 or 2012 but stressed that the new target would be up to the next President. Filipinos will choose a successor to Gloria Macapagal Arroyo in May next year. “It is possible in 2011 or 2012 but it would be dependent on the next administration," he said. The deficit, said Mr. Beltran, will be supported by additional borrowings, mostly from domestic sources. “It will be the usual program ... around 76 percent will be domestic borrowings while 24 percent will be foreign. There are no figures yet," he said. Mr. Beltran also expressed optimism that the country’s creditors would understand the abandonment of the balanced budget goal. “They (creditors) know that there will still be a slowdown in the economy until next year. The crisis will still be there in 2010...," he said. The economy is expected to grow by 4.9 to 5.8 percent in 2010, higher than this year’s 3.7 to 4.4 percent forecast, due to election spending and an improvement in global conditions. Inflation, meanwhile, is expected to average at 3.5 percent next year, lower than this year’s 3.9 percent projection, due to easing oil prices. A P45-48 to the dollar exchange rate was forecast, along with an average benchmark 91-day treasury bill rate of 5 percent. The government originally aimed to close the fiscal gap in 2010 under the 2004-2010 Medium-Term Philippine Development Plan. The target was advanced to 2008 on expectations of additional revenues but was reverted to 2010 as the global economic crisis worsened. Socioeconomic Planning Sec. Ralph G. Recto told a briefing last week that the government would be unable to balance the budget next year. But Finance Secretary Margarito B. Teves said the goal had not been abandoned even as he admitted that it would be extremely difficult to achieve the target. - Alexis Douglas B. Romero, BusinessWorld