RP budget gap could swell to P270 billion

MANILA, Philippines - The government’s budget deficit could swell to as much as P270 billion this year or 3.5 percent of gross domestic product (GDP), New York-based GlobalSource said in its latest report on the Philippines.

The US-based think-tank’s deficit forecast is wider than the revised deficit ceiling of P250 billion or 3.2 percent of GDP set by the inter-agency Development Budget Coordination Committee (DBCC) for the year.

GlobalSource said the country’s fiscal authorities may be unable to meet the targets unless it can sell more state-owned assets this year.

The government is eyeing to sell P30 billion worth of government-owned properties this year, including the 120-hectare Food Terminals Inc. (FTI) agro-industrial complex in Taguig. The government hopes to raise P10 to P13 billion from the FTI property alone.

It also hopes to sell its stake in multi-industry conglomerate San Miguel Corp. this year and expects roughly P50 billion from the sale.

However, GlobalSource said that ultimately what the government needs to do is to improve its revenue stream. The research firm said unless there is significant improvement in revenues, the government cannot push through with further pump-priming next year as planned.

“Without heightened revenue efforts, the risk of large deficits weakens the argument for fiscal easing in 2010. Further pump-priming could lead to huge shortfalls and loss of belief in fiscal sustainability, setting back expansionary policy efforts both on the fiscal and monetary side as interest rates may start to climb,” GlobalSource said.

Budget Secretary Rolando Andaya earlier said the government plans to allot roughly P160 billion next year for pump-priming activities.

For 2010, GlobalSource expects the budget gap to stay above three percent of GDP amid “weak control over revenues and the temptation to keep on spending.”

“We have our doubts the deficit will go down as targeted and will likely stay above three percent of GDP,” GlobalSource said.

The government has revised the budget deficit ceiling to P233.4 billion or 2.8 percent of GDP from a previous program of P208.4 billion or 2.5 percent of GDP.

To preserve fiscal credibility, GlobalSource said “it is surely in the country’s best interest this early to mind the gap.”