Budget gap could fall below P293-billion target

MANILA, Philippines - The country’s budget deficit may end up narrower than the programmed P293 billion for this year on expectations that the economy would sustain its strength in the first quarter of the year, Finance Secretary Margarito Teves said Thursday night.

However, Teves chief said this would only be possible if total revenues would be larger than expected and expenditures won’t be more than the programmed amount.

“All things being equal, if the (2010) GDP growth will be higher than our original forecast of 2.6 percent to 3.6 percent, total revenues would be larger than earlier forecast and expenditures are the same, then the deficit should be smaller,” Teves said.

Government officials are optimistic of higher growth this year because of the strong first quarter growth of 7.3 percent.

As such, an official of the National Economic and Development Authority (NEDA) has said that the government is considering a “substantial upward revision” to this year’s economic growth target following the strong first quarter performance.

“Second quarter and beyond may be looking good. We are looking at substantial upward revision from the conservative 2.6 to 3.6 percent (target for the year),” National Economic and Development Authority (NEDA) director Dennis Arroyo has said.

Teves agreed that the government is likely to attain the higher end of the GDP growth forecast of 3.6 percent.

The Finance chief also said that the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) are expected to collect more this year, significantly higher than their respective targets of P830 billion and P275 billion as the economy is expected to sustain its strong first quarter performance.

“If there is an upward adjustment in GDP target, there should be a comparable adjustment in revenues,” Teves said.

However, Teves said the government has yet to assess whether or not there would be a corresponding adjustment in the budget deficit ceiling of P293 billion.

The interagency Development Budget Coordination Committee (DBCC), the group that sets the country’s macroeconomic assumptions and targets, is scheduled to meet next week for the corresponding adjustments in the different macroeconomic assumptions, starting with the economic growth assumption for the year.

Estimates made by the Department of Finance showed that for every one percentage point movement in GDP, there is a corresponding adjustment in revenues amounting to P13 billion.

Socioeconomic Planning Secretary Augusto Santos said last week that 3.6 percent would likely become the “lower end” of the new growth goal for 2010.