5-month budget gap well below target

The government reported a budget deficit of P67.8 billion in the first five months of the year, well below the P98.5-billion deficit programmed for the first half of 2005, the Department of Finance (DOF) reported yesterday.

The five-month figure was also 12.4 percent lower than the P77.4-billion shortfall recorded in the same period last year.

Analysts said the latest performance showed the government was on course to meet its deficit target of P180 billion, or 3.4 percent of gross domestic product (GDP), for the full year.

"We can still say that this represents some progress," said David Cohen, director for economic and forecasting at Action Economics in Singapore.

"They look like they’re on track to achieve that target," he added.

For May alone, the country incurred a budget deficit of P7.6 billion, reversing a P3.3 billion surplus in April.

The government in April reported its first monthly budget surplus in four years, following healthy tax collections.

Revenues rose 13 percent to P68.2 billion, up 13 percent from a year earlier, while expenditures climbed 3.9 percent to P75.9 billion.

Despite the improved year-to-date deficit, the peso slumped yesterday to a five- month low of 55.76 to the dollar as investors fretted about scandal threatening the government of President Arroyo.

"We are still much ahead of our full-year target considering that our deficit for the first five months is just (around) 70 percent of what we’ve programmed for the first half," Deputy National Treasurer Eduardo Mendiola told reporters.

The government now expects this year’s budget deficit to hit P151.25 billion, below the official estimate of P180 billion which is 3.4 percent of gross domestic product.

This scenario takes into account revenues to be generated by a new value-added tax, officials said.