Yearender: 2008 an extremely stressful and difficult year – Teves

Finance Secretary Margarito Teves described the year 2008 as “extremely stressful and difficult.” Teves has more than enough reasons to describe the year as such.

In an interview with The STAR, the Finance chief said three major challenges marked the year 2008, making it difficult for the government to repeat the country’s achievements in 2007 when the economy grew by 7.2 percent.

“Three major events made 2008 difficult and these are skyrocketing commodity prices, high oil prices and the global financial turmoil,” Teves said.

These three developments forced the government to postpone its balanced budget goal to 2010 from 2008 previously.

Teves said there was a need to postpone the fiscal consolidation to 2010 because of the need to spend more.

With the postponement of the balanced budget goal, the government now expects to incur a budget deficit of P75 billion for 2008.

Given the very difficult situation and the need to spend further for social services, infrastructure and for the poor, the prospects are more difficult to arrive at a balanced-budget, the Finance chief said.

This, Teves, said is the only way the Philippines could survive the difficult global environment — to pump-prime the economy.

Socioeconomic Planning Secretary Ralph Recto agreed. He said the government accounts for 20 percent of the Philippine economy. As such, he said government spending for infrastructure projects would help create jobs and boost consumer spending.

Aside from having to postpone the balanced budget goal, the government also had to slash economic growth projections for this year and for 2009.

Again, this is due to the three major events that shook the Philippines in 2008.

From an economic assumption of 5.5 percent to 6.4 percent for 2008, the government slashed its gross domestic product (GDP) growth projection for the year to a range of only 4.1 percent to 4.8 percent.

The government also slashed the economic growth projection for 2009 to a range of 3.7 percent to 4.7 percent. This is significantly slower than the original 6.1-percent to 7.1-percent growth projection for next year.

Slower economic growth also forced the government to cut its revenue projections for this year.

The Bureau of Internal Revenue (BIR), the government’s number one revenue agency, had a target to collect P845 billion for this year but slower economic growth forced the agency to seek a lower target.

The Development Budget Coordination Committee (DBCC), the interagency group that sets the country’s economic growth, approved an emerging BIR revenue collection of P810 billion for 2008.

The Bureau of Customs (BOC), the second largest, revenue agency, had been given an original target of P254-billion but this was raised to P274 billion due to non-cash revenues from the Tax Expenditure Fund (TEF).

The so-called TEF is a subsidy released by the Department of Budget and Management (DBM) to government-owned and controlled corporations (GOCCs) and state-run companies mainly to settle customs duties and other taxes arising from the importation of goods.

Aside from taxes, the government derives its revenues from the sale of state-owned assets.

In 2008, it was able to sell two major big-ticket items — the government’s stake in Manila Electric Co. (Meralco) and Petron Corp.

Last January, the government had sold its stake in Meralco to the Government Service Insurance System (GSIS) for P8.7 billion. GSIS later sold the Meralco stake to San Miguel Corp.

As this developed, the government also sold its 40 percent stake in Petron Corp., the country’s largest oil refiner, to the Ashmore Group, the London-listed fund manager for P25.7 billion. Of the P25.7 billion, the government expects net proceeds of P21 billion or minus sale-related costs such as advisory costs.

San Miguel Corp. had entered into an agreement with the Ashmore Group to buy 50.1 percent of the government’s Petron stake.

With the transaction, Teves said the government is on track to meeting its programmed deficit ceiling of P75 billion for 2008.

Latest data from the DOF showed that the National Government (NG) incurred a budget deficit of P4.3 billion in November, a marked turnaround from the P54.1 billion surplus recorded in the same period last year, due largely to higher expenditures during the period.

Total revenues for November dropped by 26.5 percent to P109 billion from P148.3 billion while total expenditures rose to P113.4 billion, up 20.3 percent from the P94.2 billion disbursed in the same period last year.

The November budget gap brought the January to November deficit figures to P66.7 billion, reversing the P12.6 billion-surplus recorded in the same period last year.

Total revenues during the 11-month period rose to P1.081 trillion, 3.6 percent higher than the P1.044 trillion recorded in the same period last year, data further showed.

For 2009, the government hopes that things will be better, on the fiscal side and the overall economic landscape.

However, Teves said the impact of this year’s three major events would be most felt in 2009.

As such, Recto said there was a need to boost spending to keep the economy afloat.

“If we spend the budget in the first two months of next year, that would help the economy,” said Recto.

He said the government hopes to spend the P1.415-trillion proposed budget for 2009 on crucial but hassle-free infrastructure projects.

These projects are the ones with no right-of-way issues, he added. Filipinos are keeping their fingers crossed that the government would indeed deliver on its promises to put in place enough mitigating measures for the country.-Iris C. Gonzales, Philippine Star