Speaking before members of the Bank Marketing Association of the Philippines (BMAP), BSP Governor Rafael B. Buenaventura said monetary officials were not particularly worried about the deficit this year, saying there was no indication that there would be a repeat of the 2002 fiscal crisis.
According to Buenaventura, the BSP remains confident that the government could regain fiscal discipline this year with revenues slightly above target and expenditures under tight reins.
"Even with all this political noise surrounding us, I am confident that the economy would be able to weather this through," Buenaventura said. "Let’s not get depressed."
However, Buenaventura admitted that the political scenario could only get noisier in the coming months leading up to the May elections and he said this would affect short-term expectations.
"The old Chinese saying "May you live in interesting times‚ would have a richer meaning to us," Buenaventura said. "Our times would get more interesting in the coming eight months."
According to Buenaventura, however, the country‚s economic fundamentals were still good, particularly the fiscal balance which has caused serious apprehensions in 2002 and up to the early part of 2003.
"Right now there is every indication that the deficit target will be met," he told bankers.
According to Finance Secretary Jose Isidro Camacho, on the other hand, the primary goal of the Arroyo administration was to meet its P202 billion deficit target. "If we outperform that target, that’s a bonus but that isn’t our goal," he said.
Finance and budget officials have been wary about drumming up expectations for 2004, preferring to stay within the fiscal target rather than outdoing it because this might force the government to accelerate its deficit reduction program.
The Arroyo administration had originally made a commitment to balance the budget by 2006 but it this was later revised to 2009. Finance officials said this would give the next administration a goal to work for when it takes over the government after the 2004 presidential and general elections. It also means that the next administration would be spending all its time struggling against the budget deficit.
The budget was originally programmed to go down to P130 billion in 2002 but it instead ballooned to P216 billion due to the increase in government spending and the decline in revenues.
This year, the deficit was expected to reach P202 billion, making it extremely unlikely that the government would be able to balance the budget as scheduled in 2006.
According to budget secretary Emilia Boncodin, however, the government may still be able to balance its budget before 2010 but only a year earlier in 2009.
Boncodin said the fiscal program was still being discussed by the Development Budget and Coordinating Committee (DBCC) and different scenarios were being simulated to determine which was the most realistic and achievable.
"We were really derailed by our fiscal performance in 2002," Boncodin said. "As a result, we have to play catch-up on top of meeting the annual deficit target that would put us closer to a balanced budget."
Boncodin said moving the target four years later would make it more realistic and reflective of how much the government could reduce its expenditures while trying to increase its revenue collection.
"This way, the slope is less steep," Boncodin said. "There should be a progressive decline in deficit every year. It looks like a long time but if it is realistic, its better than saying we can balance the budget tomorrow and missing that target."