JP Morgan sees higher RP growth this year

MANILA, Philippines - JP Morgan expects the Philippine economy to grow 4.5 percent this year, higher than the government’s official forecast range of 2.6 percent to 3.6 percent.

The higher-than-expected growth would allow the government to post a yearend deficit which is just near the P293-billion ceiling, despite what it called an “ugly deficit” in March of P63.9 billion, JP Morgan said.

The global investment and research firm expects revenues to improve in the coming months because of more prudent spending and proceeds from privatization of state-owned assets which can come in the latter part of the year.

The March deficit of P63.9 billion, which was wider than the P52.6 billion incurred in the same month last year, brought the government’s first quarter deficit to P134.2 billion, worse than the initial plan of P110.9 billion and year-ago deficit figures of P119.7 billion.

“Nevertheless, there are several reasons to expect improvement in the months ahead. First, spending is expected to have slowed this month due to election-related restrictions placed on the fiscal authorities,” JP Morgan said.

JP Morgan also said higher growth would also push revenues in the latter part of the year.

“The government estimates that every one percentage-point increase in gross domestic product (GDP) growth equates to a P13-billion increase in nominal revenue collections. So far, revenues from the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) have come in higher than projected,” JP Morgan said.

Another compensating factor, JP Morgan said, is the expected privatization revenues that could come in the latter part of the year.

“The full year privatization target is P30 billion. Though it is not clear that the government will meet this goal, the fact that the government has already missed half of its target suggests that there is upside risk to revenues at a later date if some of missed privatization receipts do materialize,” JP Morgan said.

The government is eyeing to sell the Food Terminals Inc. (FTI) property in Taguig, its stake in Philippine National Oil Co.-Exploration Corp. (PNOC-EC) and also lease out its real estate property in Fujimi, Japan.

As such, despite the larger than expected budget deficit in the first quarter, JP Morgan said second quarter revenues would allow the government to however near its full-year budget gap.

The official deficit ceiling is P293 billion. JP Morgan expects the yearend budget gap to hit P295 billion.

“Improvement in the second quarter should enable the government to meet its year-end target of around P295 billion. This would be about the same size deficit as last year’s P298.5- billion deficit and it would leave the deficit at a slightly smaller 3.5 percent of GDP versus 3.9 percent of GDP last year,” JP Morgan added.