Merrill Lynch sees RP budget deficit at P80B

US-based investment bank Merrill Lynch sees the country with a lower budget deficit of only P80 billion this year or equivalent to only 1.3 percent of gross domestic product (GDP).

The government is targeting a budget shortfall of P125 billion for this year or about 2.1 percent of GDP.

"We expect the authorities to beat their fiscal target by a large margin this year. The authorities have engineered a stronger-than expected fiscal adjustment this year, but in an unconventional way," Merrill Lynch said.

For the first six months of the year, the National Government (NG) was able to cut its budget deficit by more than half, or by 53.3 percent, to P31.5 billion from P67.5 billion in the same period last year due to improved revenue collections and lower spending.

The six-month budget gap was a substantial improvement by P58.9 billion against the programmed deficit of P90.4 billion after the government posted surpluses in April (P17.6 billion); May (P5.8 billion); and June (P12.7 billion).

According to the US-based firm, the much-improved fiscal adjustment could be traced from a lower government expenditures as Congress failed to formally adopt the national budget for 2006.

Budget hearings were stalled after the Senate slashed the proposed 2006 budget by P60 billion cutting major projects advocated by President Arroyo.

Albay Rep. Jose Salceda, on the other hand, has already filed a new bill seeking a P46.4 billion supplemental budget to augment the reenacted 2005 budget.

Based on the proposed 2006 budget, the government is supposed to jack up capital spending by 21.5 percent to finance key infrastructure projects. But with the failure to enact the 2006 budget, the government could only increase investment spending by only 9.5 percent.