Better-than-expected third-quarter economic growth will likely boost revenue collections for the last three months of the year but base effects may dampen primary spending growth, the research arm of Citigroup Global Markets, Inc. said.
Citi Research said in a report released late Thursday that the country’s robust macroeconomic fundamentals, as evidenced by the 7.1% year-on-year gross domestic product (GDP) growth in the third quarter — surpassing expectations and also topping the government’s 2012 target of 5-6% — may also lead to improved state revenues.
“The strong 3Q macro backdrop — likely to feed to upbeat 4Q growth — will also contribute to revenue collection,” Citi Research said.
“Despite peso appreciation, the strong oil import bill in October is likely to linger into 4Q12, likely supporting the 17.9% year-on-year jump in Customs collections,” it added.
The government last Thursday reported an October budget deficit of P9.647 billion, with expenditures slightly edging out better revenue collections. The 10-month tally stood at P115.74 billion, still well under the P279.1-billion cap for 2012.
Revenues amounted to P134.32 billion last month, up 29.23% from a year earlier, after the Bureau of Internal Revenue and the Bureau of Customs posted double-digit gains of 22.1% and 17.9%, respectively.
The government shored up P1.25 trillion from January to October, 12% higher than last year’s P1.12 billion and only P307 billion short of the government’s P1.56-trillion revenue program for the year.
“This gap can be bridged over November to December since the 10-month revenue trend shows average revenues running at P125 billion per month,” Citi Research said.
Spending, meanwhile, grew by 15% to P143.99 billion in October, bringing the tally thus far to P1.369 trillion, up 14.5%. Expenditures are programmed to hit P1.86 trillion this year, which means the government must spend P491 billion in the last two months to meet this goal.
Citi Research noted that the government’s primary expenditures, which refers to expenses minus interest payments, grew by a mere 8.9% year-on-year to P122.554 billion last month versus the 19.6% growth notched last September.
“For January to October, primary expenditures grew 14.8% year-on-year, suggesting the strong spending momentum was mainly in 1H12.
“While overall expenditures grew 15% year-on-year in October, the interest bill soared nearly 30% year-on-year in October, accounting for the bulk of spending,” the firm said.
It added that base effects could also curtail the growth of this quarter’s primary expenses.
“Base effects will also be a challenge to primary expenditures in November to December — a year ago, primary expenditures recorded growth exceeding 40% year-on-year in November to December 2011 as the government shifted course to fiscal expansion,” it said.
Government expenditures spiked in the fourth quarter last year as it implemented a P85-billion disbursement acceleration plan (DAP) to make up for the underspending that marked most of 2011.
Budget Secretary Florencio B. Abad last week said a “smaller” DAP could be rolled out this year, subject to the approval of President Benigno S.C. Aquino III. He noted that this would take advantage of the fiscal space provided by additional revenues collected, not because allocations remained underutilized. — Bettina Faye V. Roc, BUsinessworld
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