Philippine Deficit Widens as Government Spends to Aid Growth
The emerging budget deficit last year was 191.6 billion pesos ($4.4 billion), Budget Secretary Butch Abad said in Manila today after meeting with economic officials. The 11-month shortfall was 96 billion pesos, a report showed last month, indicating the gap doubled in a month. The economy probably grew 3.6 percent to 4 percent in 2011, Ruperto Majuca, assistant director-general at the National Economic and Development Authority, said today.
President Benigno Aquino is increasing spending to a record this year while luring investments in roads, airports, and schools in an effort to boost growth to as much as 8 percent annually. Bangko Sentral ng Pilipinas reduced its benchmark interest rate last week, the first cut since 2009, joining emerging markets from Thailand to Indonesia in easing monetary policy as a deteriorating global economy threatens growth.
“Fiscal policy, if it pans out more efficiently, will be a very good complement to monetary policy, which will remain accommodative,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “It is going to be a very tough period ahead. Growth will be a lot more erratic, and it’s not going to be just peculiar to the Philippines.”
Benchmark bond yields due January 2018 climbed to the highest level in more than three weeks after the report, according to Tradition Financial Services. The peso climbed to a two-month high today, according to Tullett Prebon Plc. The Philippine Stock Exchange Index (PCOMP) dropped for a second day.
The government forecasts the budget deficit will widen this year to 279 billion pesos, or 2.6 percent of gross domestic product, from 2 percent last year, Abad said today. He reiterated the goal of maintaining the ratio at 2 percent from 2013 to 2016.
Fourth-quarter economic growth may have exceeded the 3.2 percent year-on-year expansion in the third quarter and be lower than 5 percent, Majuca said. The government is scheduled to release GDP data on Jan. 30.
Officials assumed a 6 percent to 7 percent gross domestic product growth next year in planning the budget, Finance Assistant Secretary Maria Teresa Habitan said today. Economic officials maintained the forecast for the economy to expand 5 percent to 6 percent this year.
The government plans to increase revenue to 1.56 trillion pesos this year and boost spending to 1.84 trillion pesos, Abad said. The Bureau of Internal Revenue is tasked to collect 1.07 trillion pesos, while the Bureau of Customs is expected to raise 347 billion pesos, he said.
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