RP fiscal deficit balloons by more than five times

MANILA, Philippines - Accelerated spending and weaker revenues forced the Philippine government to incur a five-month fiscal gap that is more than five times higher than the deficit recorded during the same period last year. The national government's fiscal deficit reached P123.2 billion from January to May, 556.2 percent more than the P18.8 billion reported during the same period last year, Department of Finance (DOF) Secretary Margarito B. Teves said. For May, the government was prompted to spend P11.4 billion more than it earned for as lower corporate income taxes, tax relief, and weaker imports (which translate into fewer duties) ate into revenues, the DOF said. Despite these bleak results, the government remains confident of meeting its first half deficit ceiling of P155.1 billion, Teves said. "Even as we continue to support growth through increased expenditures, we will maintain fiscal discipline by being focused on quality spending and more effective and persevering in raising revenues," he told reporters. Total revenues slipped 5.4 percent during the January to May period at P456.2 million from P482.4 million as the Bureaus of Internal Revenue (BIR) and Customs (BOC) saw lethargic performance. The government has a lot of work to do to meet its P581.4-billion target for the first semester. In May alone, revenues dipped 2.5 percent year-on-year to P104.2 billion from P106.9 billion. Higher personal exemptions and availment of the optional standard deduction by corporate taxpayers under Republic Act No. 9504 and the reduction in corporate income tax this year dragged down BIR collections by 6.1 percent during the five month period to P315.2 billion. In May, it generated 70.34 percent of total revenues but raised 5.6 percent less for the government at P73.3 billion. The BoC collected eight percent less at P19.8 billion due to lower imports, bringing total revenues weaker by 8.3 percent to P84.5 billion. The tax and customs bureaus are tasked to raise P388.4 billion and P124.9 billion, respectively, for the six-month period. The Bureau of the Treasury, which has to generate P29.1 billion for the first half, raised 10.3 percent more for the government at P27.9 billion for the five-month period from P25.3 billion even if revenues dipped 0.2 percent to P3.5 billion in May. The government spent 15.8 percent more at P115.6 billion in May than nearly P100 billion the same period last year. Its five-month expenditure reached P579.3 billion, up 15.6 percent year-on-year to P501.2 billion. As the deficit is expected to reach 3.2 percent of the gross domestic product (GDP) worth P250 billion, Teves said adjustments would be made in the second semester. The government is working on a P199.2 billion fiscal gap for the first six months. "We will continue spending on infrastructure and social services. We hope the conditions and the outlook of confidence will improve," he said. "We need to disburse quicker so when the agencies receive the money, they should spend it as quickly as possible. At the same time they have to make sure it is really quality spending," he added. Although the Development Bank of Singapore (DBS) warned that the fiscal gap may balloon to a 24-year high, Teves said budget deficit as a percent of GDP will be lower even if the projected P250-billion fiscal gap will be higher than the P210.74 billion deficit in 2002 which is equivalent to 5.43 percent of GDP. "The circumstances in 2004 are different from the circumstances in 2009. World conditions are different from what they were in 2004," he added. Manila is counting on the P21 billion from the sale of its 120-hectare Food Terminal Inc. property and 40-percent stake in Philippine National Oil Co.-Exploration Corp. (PNOC-EC) this year but given the market’s weakness, it may miss its September 30 deadline. Listed PNOC-EC said its privatization is "untimely" due to "depressed" stock market prices. "PNOC-EC is unaware of a dateline set for privatization. Any forced privatization may not be advantageous to the corporation and the government as it might lead to a fire sale. The PNOC-EC Board thinks it is better to wait for the economy to improve," compliance officer Jose M. Eijansantos said last week. However, Teves said the dateline may spill over to October. "What matters is we get the proceeds. The decision will have to be made collectively by the Cabinet. The President has made a decision that depending on the prudence and market condition, we will go ahead. We are still trying to figure out what market conditions are there but we need resources to cover our deficit," he added. - GMANews.TV