6-mo budget deficit swells to P119.72-B

The government’s budget deficit ballooned to P119.72 billion in the first six months, overshooting its P78.26 billion target for the period by a whopping P41.46 billion or 56 percent, the Department of Finance (DOF) reported yesterday.

Analysts said the report triggered a fall in the peso against the dollar and fears of a sell off in stocks when the market reopens today as the numbers are keenly watched by financial markets as a signal of the government’s fiscal efficiency.

The stock market had closed before the data was announced, but the peso slipped by 28 centavos to 50.660 from the previous day’s close of 50.38 to $1.

"The deficit figure is one of the main indicators the whole world watches for the Philippines and that number will definitely not be perceived well," said Andrew Long, head of research at KTR-Kim Eng Securities.

"It is likely to be taken negatively by the stock market. It will re-ignite fears of recent weeks that the government will have an extremely difficult task in meeting the P130 billion full-year deficit target," Long said.

According to the DOF, the January to June figure already reflected "a much slower trend as revenues began to pick up strongly in June."

The deficit alone in June was P12.18 billion, lower than a monthly average of slightly above P21 billion in the first five months of the year.

"The June numbers are indicative of an improving trend in revenues," Finance Secretary Jose Isidro Camacho said yesterday. "We therefore expect a slowing down or even a likely reversal of the deficit trend in the second half of the year," Camacho said, adding that "for this reason, we remain committed to meeting our full-year target of P130 billion (deficit)."

Overall, the key indicators showed marked improvement over the 2001 figures for the same period but remained dismal when compared to what the Arroyo administration actually hoped to achieve in terms of revenues and expenditures.

DOF spokesperson Corazon Guidote said that all targets will stay the same despite the first semester figures that showed how far the administration was from its goals. "It’s dangerous to make assumptions at this point," Guidote.

Even if the government decided to adjust its 2002 targets, Guidote said the adjustment would most likely be on the expenditure side. Guidote said the improvement in revenue collections actually allowed the first half revenues to edge up by 0.1 percent in June after falling by 2.6 percent in January to May.

However, the slight improvement in the June collection did nothing to improve the possibility of meeting the revenue targets.

The first semester revenue collection was still 12 percent short of the P303.48 billion target against the actual collection of P266.9 billion.

The government also ended up spending more than it intended, overshooting its programmed expenses by P4.88 billion. Government expenditures amounted to P386.62 billion during the six-month period against the programmed P381.74 million.

"It will be a challenge to the government to produce a surplus every month for the rest of the year. Just to be able to keep things steady will be good enough," Guidote said.