Budget deficit expected to hit P340 billion this year

MANILA, Philippines - The government’s budget deficit could swell to as much as P340 billion this year due to poor revenue collections, the Development Bank of Singapore (DBS) said yesterday.

“Given the weak growth outlook, we think the deficit will amount to P280 to P340 billion or 3.7 percent to 4.5 percent of gross domestic product (GDP),” DBS said.

DBS’ projection is above the revised official deficit projection for the year of P250 billion. The Singapore-based bank said that for the government to meet the goal, the government should either improve revenue collection or slash spending in the second half of the year or both.

DBS noted that if revenues hit a monthly average of P91 billion in the second half of the year as in the first half of the year, and the average monthly expenditures hit P117 billion from July to December, the budget deficit for 2009 would be above P300 billion.

As such, the DBS said that the government’s new deficit target of P250 billion for the year “could still be underestimating the deterioration in the fiscal position.”

“Clearly, with a cumulative deficit of P153.4 billion for the first half of 2009 – already more than half the government’s P250 billion target – fears that the official target could be breached will persist and the government’s fiscal position will remain the key issue for the local currency bond market,” DBS said.

However, officials said the government is still hopeful of meeting the P250 billion deficit ceiling for the year.

“Given the fiscal performance in the first six months of the year, we are hopeful that we will remain on track with our deficit program of P250 billion or 3.2 percent of gross domestic product (GDP) this year,” Teves has said.

The government incurred a budget deficit of P153.4 billion from January to June or 752.2 percent higher than the P18 billion deficit posted in the same period last year as the country continue to feel the impact of the global financial crisis.

Total revenues for the period amounted to P545.7 billion, lower than program by P35.7 billion while expenditures expanded by 18.9 percent to P699.1 billion

For the month of June, the government incurred a budget deficit of P30.2 billion, reversing the P800 million surplus posted during the same month last year.

Total revenues for the month amounted to P89.6 billion, slightly up by 2.3 percent compared to June last year. Total spending for the month of June reached P119.8 billion, an increase of 38 percent compared to the same month last year.