Slow spending still behind low 6-mo deficit of P34.48-B

Rappler.com

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MANILA, Philippines (UPDATED) – The budget deficit for the first 6 months of 2012 reached P34.482 billion, way below than the target of P109.341 billion for the period as the Aquino government’s spending remains tame.

This brings the budget deficit at just 12% of the full year ceiling. For the month of June alone, the deficit reached P11.696 billion.  

Finance Secretary Cesar Purisima said the latest fiscal position provides enough “fiscal space” to stimulate the economy if necessary.

“I am extremely pleased with our position. If we need to accelerate expenditures, we can. It shows that the Philippine government has fiscal space. The first half deficit is below by close to P75 billion compared to the first half program. This gives the government ample space to pump prime if necessary,” Purisima said during a briefing.

He also said the government’s latest fiscal position boosts the country’s chance of finally earning an investment grade rating from global debt watchers.

Credit rating

The country’s fiscal picture has largely been attributed for the past 7 credit rating upgrades international agencies like Standard & Poor’s, Moody’s, and Fitch Ratings have issued. These have been considered votes of confidence for the Aquino government’s discipline to keep its fiscal house in order.

“The lower than expected deficit of P34.48 billion will bolster the national government’s bid to improve its sovereign credit ratings,” stressed Budget Secretary Florencio Abad at a press briefing on Thursday, July 26.

The Philippines is one notch below investment grade credit rating, which translates to lower cost of the debts the government issues to plug the deficit.

The government has committed to spend its P1.8 trillion budget for 2012. It wants to keep the deficit at 2.6% of GDP in 2012, further reducing it to 2% by 2013 up to 2016, when President Aquino’s term ends.

“We are committed to our medium-term fiscal consolidation program,” Purisima stressed.

Spending below target, but a no-issue

But while a low budget deficit-to-GDP ratio has earned the Philippines credit rating upgrades, the credit rating agencies and other keen watchers of Philippine fiscal picture, have also raised concerns about lower-than-target government spending.

Government underspending has impact on the pace of the country’s overall economic growth, as the experience in 2011 showed.

The gross domestic product (GDP, a general measure of the economic performance), slid to 3.9% in 2011 from a robust 7.6% in 2010 when good governance checks in the bidding process for capital intensive infrastructure projects delayed the roll out of crucial road, rail, and airport projects.

For January to June this year, the government spent more than it did in the same period in 2011, but still P90 billion below than its target for this year.

Total spending for the first half reached P795.403 billion, 13.8% higher than the comparable disbursements in 2011. However, this falls short of the P885.288 billion ceiling.

Budget Secretary Florencio Abad, however, stressed that in the 2nd quarter alone, the government “disbursed P400.5 billion or a 14.6% growth year-on-year, slightly better than disbursements performance in the first quarter, which reached P394.9 billion or 13.1% year-on-year.”

“With govt disbursements in the 2nd quarter growing a bit faster than in the first quarter, we are confident that national government spending will again make a significant contribution to economic growth,” he said, noting.that public spending was a significant contributor to the 6.4% GDP growth in the first quarter,” Abad said.

In June alone, actual disbursements amounted to P126.972 billion.

Revenues higher but below goal

Total revenue collections reached P760.921 billion for January to June.

This is 11.6% higher than previous year’s revenue collections for the period, but 15% below the P775.947 billion target.

This is the breakdown:

  • P521.159 billion from Bureau of Internal Reveneu
  • P143.425 billion from Bureau of Customs
  • P50.223 billion from Bureau of the Treasury
  • P46.114 billion collections from other offices


– Rappler.com


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