RP fiscal deficit worsens, forcing revision of targets
RP fiscal deficit worsens, forcing revision of targets
Cecil Morella, Agence France-Presse, Manila
A blowout in the Philippines' budget deficit has forced the government to raise its deficit ceiling for this year and 2003, Budget Secretary Emilia Boncodin said Thursday.
Boncodin also said the economy is expected to grow at a slower clip of 4.2-5.2 percent next year, compared with an earlier forecast of 5.0-5.5 percent.
The budget deficit soared to 187.6 billion pesos (US$3.5 billion) in the 10 months to October, she said. The government had originally targeted a 130 billion peso deficit for the whole of this year.
While the economy was on track to meet its forecast four percent economic growth target this year, the budget deficit remained an "important challenge", she told a news conference.
Because of lower than expected government revenue, the budget deficit target for this year was being revised to 5.6 percent of gross domestic product (GDP) and the 2003 target to 4.7 percent.
Manila earlier set the deficit target at 4.0 percent of GDP this year, and 3.3 percent for 2003.
Boncodin said Bureau of Internal Revenue collections fell 18 percent in October from a year earlier as individual and corporate taxpayers shifted to monthly payments from their previous practice of paying every three months.
She said she expects this factor to hurt revenue again -- but for the last time -- in January.
At the same news conference, Finance Secretary Jose Isidro Camacho said Manila intends to tap the domestic market for 52 percent of the funding shortfall, with 48 percent to be borrowed from abroad.
The earlier plan was to borrow 56 percent abroad, but the spreads on Philippine global bonds have widened since global ratings agency Standard and Poor's last month lowered the outlook for the Philippines sovereign rating to negative from stable.
Standard and Poor's warned that Manila's eroding fiscal position could put pressure on the peso. The local unit plunged to a 15-month closing low of 53.66 to the dollar on Wednesday.
"We are modifying our borrowing program," Camacho said, to recognize "market conditions make it more attractive to borrow domestically."
Boncodin said that over the medium term, President Gloria Arroyo's government would rely on Congress to pass new tax laws to ensure the progress of reforms.
She said this would include a revision of excise taxes on motor vehicles, as well as amendments to taxes on tobacco and liquor.
The news of the worsening budget deficit saw Philippine share prices close down 3.36 points or 0.3 percent at 1,030.84 shortly after the announcement.
Boncodin also warned that circumstances beyond Manila's control, such as terrorism or war in the Middle East could put further pressure on the economy next year.
"Terrorism is a major consideration we have factored into our many scenarios with the onset of the bombings in key Asian destinations and the possible war between the U.S. and Iraq," she said.
"Events related to them will have a direct bearing on the global investment climate and the volatile prices of specific items such as crude oil and foreign currency."
Economic prospects next year remained optimistic despite the lower growth forecast, she added. Inflation and interest rates were at record lows of 3.2 percent and 5.5 percent respectively and export growth has been stronger than expected.