Despite the record fiscal blowout which most analysts believe will shoot past P300 billion by the end of the year, which prompted the International Monetary Fund (IMF) to place the country back on its danger watchlist, economic officials insisted yesterday the current budget deficit level is not something to be alarmed about.
Bangko Sentral ng Pilipinas (BSP) deputy Gov. Diwa Guinigundo said the fiscal shortfall, if measured against the country’s gross domestic product (GDP), is within regional and global standards.
This does not mean, however, the government can afford to take it easy and let the budget gap run away, Guinigundo said.
He said on radio the world’s largest economy, the United States, has a deficit wider than 50 percent of its GDP adding that some of the country’s neighbors in Asia have deficit levels far bigger than what the country has.
“The Philippines has a deficit-to-GDP ratio that is not even four percent of local output,” Guinigundo said.
How the government plans to address the widening gap is far more important than keeping the deficit target, which has a ceiling this year of 3.2 percent of GDP or P250 billion. The 10-month shortfall, thus far, had exceeded the limit totaling P266 billion.
Presidential economic spokesman Gary Olivar said the IMF need not be concerned about the government’s commitment to fiscal stability which has been duly recognized through successive credit rating upgrades on the country.
“Despite fiscal pressures from economic stimulus and post-calamity reconstruction programs, the deficit-to-GDP ratio remains manageable and under four percent,” he said.
The government is redoubling efforts on tax collections, pushing new revenue-raising measures to Congress, and continuing the sale of government assets, he added.
The fiscal space remains ample and gathering global recovery could further improve economic and fiscal prospects, Olivar noted.
“We remain confident that while we may have breached our original budget of a P250-billion deficit, we will still come in below our worst case scenario of P300 billion by the yearend,” he said.
Guinigundo said while the revenue stream has slowed significantly, thus far, during the year, he attributed the ballooning deficit more on the government’s need to spend more for reconstruction and rehabilitation in the wake of a series of natural calamities hitting the country’s capital beginning last September.
He also added while the widening deficit increased the likelihood of more borrowings, this can still be safely accommodated given the public sector’s level of indebtedness.
Guinigundo, however, said the government should “sustain its collection efficiency” to prevent the fiscal blowout from worsening.
Guinigundo said there is a law on attrition that rewards efficiency in the revenue collecting agencies and penalizes non-performers.
“I guess it is a challenge for government to abide by the requirements of the attrition law,” he said.
The ratio of tax collection to GDP had fallen steadily from its 1997 peak of 17 percent when the Comprehensive Tax Reform Program was introduced.
The ratio, however, fell to 13.5 percent in the past quarter. –Aytch de la Cruz, Daily Tribune
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