March budget deficit swells to P53 billion

MANILA, Philippines – Accelerated spending and weak revenue collection pushed the country’s budget deficit to P52.6 billion in March, almost triple its level in the same month last year, the Department of Finance (DOF) reported yesterday.

The March deficit was the highest monthly deficit ever, the DOF said. The closest level was recorded in January this year when it hit P38.05 billion.

The latest figure brings the fiscal shortfall for the first three months of the year to P119.7 billion, already nearly two-thirds of the government’s revised full-year estimate of P199.2 billion or 2.5 percent of gross domestic product (GDP).

The first-quarter deficit was also higher than the P110-billion target for the period.

The government has been frontloading spending to overcome the slowdown in the economy, which it also blames for poor revenue collection.

Finance Secretary Margarito Teves said the fiscal program was adversely affected by the decline in revenues that reached only P235.4 billion; P16.4 billion lower than the P251.8-billion target.

More than missing the first quarter target, Teves said revenues actually declined by 7.2 percent compared with the actual collection recorded last year. Teves said the decline in revenues was a result of a slowdown in the economy that affected major revenue sources.

The Bureau of Customs (BOC) reported recently that it was P5 billion short of its P51-billion collection goal for the first quarter due to sluggish imports. The BOC accounts for a fifth of the government’s total revenues.

In January and February, government revenues retreated by 5.5 percent to P159.4 billion as the tax take of the Bureau of Internal Revenue, the country’s main revenue-generating agency, fell 4.6 percent to P102.6 billion while that of the BOC dropped seven percent to P28.3 billion.

“The problem really is with the revenue collections, certainly the January-February numbers were very soft even looking through the revised numbers,” said Nicholas Bibby, regional economist at Barclays Capital.

Bibby said the government would likely exceed its deficit ceiling this year.

“If we do see an improved economy through the second half of the year, the government may be able to scale back some of the spending in order to meet the target but certainly there is a risk that we could see the target being breached. I would say three percent of GDP (under a worst case scenario),” he explained.

Earlier, Socio-economic Planning Secretary Ralph Recto said the 2009 budget gap could widen to as much as P257 billion or about three percent of GDP if tax collections fall short of target and the government fails to sell some assets.

The government has revised its 2009 budget deficit target thrice since late last year, when it originally set a goal of P40 billion. This was raised to P102 billion, then to P177.2 billion, then to P199.2 billion recently.

The government earlier planned to balance the budget by 2010, but has pushed that goal back.

The Philippines expects to increase its foreign borrowings this year to P174.9 billion ($3.6 billion) from the previous estimate of P147.4 billion to plug the ballooning budget deficit, according to National Treasurer Roberto Tan.

Tan told reporters the government has adjusted its borrowing mix this year to 72-28 percent in favor of local debt from 75-25 percent previously.

The government wants to source more cheap funds from multilateral development lenders this year but it cannot rule out possible overseas debt issues, Tan said. –Des Ferriols, Philippine Star