BSP cites need for clear fiscal plan

The next administration must lay down a clear fiscal consolidation program after the global financial crisis derailed the country’s goal to balance the budget last year. Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. told reporters on Tuesday a clear fiscal consolidation program would be a major confidence-building factor for the next government. “The government has made several adjustments to its plan, the consolidation has moved this to 2013. If the government can keep itself on track, then it would be positive for the market," he said. The Arroyo administration has put in place several fiscal reforms aimed at balancing the budget by 2008 or two years ahead of the original 2010 schedule under the medium-term Philippine development plan. The National Government managed to trim the budget deficit to P12.4 billion or 0.2 percent of the gross domestic product (GDP) in 2007 from a record level of P210.7 billion or 5.3 percent of economic output in 2002. But the global financial turmoil forced the government to abandon both commitments and is now looking at 2013 as the target. The budget gap ballooned to P68.1 billion or 0.9 percent of economic output last year and is now in danger of reaching a new record of about P290 billion or P40 billion more than the deficit ceiling of P250 billion. The emerging figure is 3.7 percent of GDP. The government on Tuesday noted that while the 2010 deficit would be higher at P293 billion, its ratio to GDP will be lower at 3.5 percent. At the end of November, the budget gap stood at P272.5 billion, already worse than the P250-billion program for the year. For November alone, the government posted a deficit of P6.4 billion. Teves earlier noted that given the poor fiscal performance in 11 months, they were looking at a P300-billion ending this year. The November figure was P2.1 billion more than a year earlier, while the January to November deficit was already almost a tenth or P22.5 billion higher than the full-year goal. Tetangco said the central bank would support efforts of fiscal authorities to put in place a fiscal consolidation plan for the medium term. “In the fiscal sector, the deficit is higher than initially planned owing mainly to the stimulus programs that were necessary to provide a lift to the domestic economy. That is a confidence-building step that is most welcome," he added. — GMANews.TV