MANILA, Philippines – Citigroup expects the Philippines to post a budget deficit of P197 billion this year or 2.4 percent of the country’s total economic output.
The bank’s projection is higher compared to the government’s revised budget gap projection of P177.2 billion for the year or 2.2 percent of the country’s gross domestic product (GDP).
In terms of tax to GDP ratio, Citigroup also expects the yearend figure to settle at 14 percent, also lower than the government’s revised tax effort target of 14.3 percent.
Citigroup said declining revenues for 2008 were behind the bleak projections.
The lackluster revenue backdrop in 2008 compelled us to lower our tax to GDP assumption in 2009 to 14 percent, in-line with the actual ratio for 2008, the bank said in its latest report on the Philippine economy.
The bank said that the poor macroeconomic environment, rising layoffs, potential business failures and the lack of tax reform legislation ahead of the May 2010 national elections are likely to affect the government’s revenue stream.
The National Government incurred a budget deficit of P68.1 billion in 2008 or below the P75-billion deficit ceiling.
Revenue collections reached P1.202 trillion or P22.3 billion below the program for the year while expenditures reached P1.271 trillion or P29.1 billion below the program.
Of the P1.202 trillion in revenues, the Bureau of Internal Revenue (BIR) collected P778.6 billion for 2008 or P31.4 billion below the revised collection goal of P810 billion while the Bureau of Customs (BOC) generated P260.2 billion last year or P13.8 below its revised revenue target of P274.1 billion.
With the global financial turmoil, government economic managers have had to revise downward the country’s macroeconomic assumptions for the year.
The GDP target for 2009 has been revised to a range of 3.7 percent to 4.4 percent from 3.7 percent to 4.7 percent previously.
The P177.2 billion-yearend deficit target has been revised from a previous program of P102 billion.
The average inflation forecast for 2009 has also been revised to three percent to five percent from a previous range of six percent to eight percent.
The export growth projection for 2009 was also revised downward to a negative eight to 10 percent from a growth of one percent to three percent.
Citigroup said the downgrade of the country’s macroeconomic assumptions would negatively affect sentiment.
“With the official downgrade of the government’s FY09 macro assumptions and fiscal deficit target, we think local financial markets could be bracing for more negative economic readings — clearly a drag to market sentiment,” the Citigroup said.– Iris C. Gonzales, Philippine Star