BMI Research sees spending up 12%, revenue up 13%
Fiscal spending has begun showing signs of a pick-up as designed, and by 2016 could post a 12 percent increase over this year, which government revenue is likely to match or slightly exceed with a 13 percent rise, BMI Research forecast in its latest note.
As a result, the programmed budget deficit as a percentage of gross domestic product (GDP) could narrow further to 0.2 percent by next year from an estimated 0.4 percent this year, the think tank unit of the Fitch Group said in the research note released on Monday.
“We are penciling in a 12 percent increase in government spending in 2016, representing an upward revision from our previous estimate of 9 percent,” BMI Research said.
Following restrained spending momentum in recent quarters, which had been blamed for the sharp slowdown in GDP growth in the first quarter of 2015, government consumption in the second quarter rose by 3.9 percent year-on-year in real terms from a 1.7 percent annual expansion in the first quarter.
Revenue, on the other hand, is seen sustaining its double-digit growth momentum next year from recent years.
“We forecast revenue to rise by 13 percent in 2016 from 10.4 percent previously, marking a continuation of its double-digit growth in recent years,” BMI said in the note.
“In addition, the government has also signaled its intention to accelerate spending over the coming quarters by proposing a P3 trillion budget for 2016, which represents a huge 15.2 percent increase from the 2015 budget,” the note added.
BMI also expects the current Administration to step up implementation of the public-private partnership (PPP) infrastructure scheme before the end of its single six-year term in mid-2016.
This should, in turn, lead to higher government spending, it said.
BMI does not see the potential increase in public spending over the coming quarters exerting much pressure on the fiscal accounts because government revenue is expected to match the rise in spending.
“Even though government spending is set to increase over the coming quarters as the election season approaches in mid-2016, the positive fiscal story that has unfolded under President Benigno Aquino 3rd and his administration since 2010 should continue as we enter into 2016,” it said.
In a sign of increasing fiscal prudence, the latest data from the Bureau of the Treasury showed that government revenue rose by 14.9 percent year-on-year to P1.26 trillion in the first seven months of 2015, which outpaced the 10.9 percent increase in fiscal spending in the period, BMI noted.
The think tank cited some of the measures undertaken by the Administration, such as
expanding the country’s tax base, deterring tax evaders via the “Run After Tax Evaders” program, simplifying tax-filing processes through electronic means, and introducing the sin tax law in 2012.
“The government coffers should also rise along with economic growth. In addition, the undisbursed portion of the 2014 government budget as a result of lackluster spending provides the fiscal space to accommodate an increase in expenditure over the coming quarters,” it said.