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    Ben D. Kritz

    Ben D. Kritz

    At the end of last week, there were two routine economic reports issued by the government: The report on the government’s fiscal position, which is provided monthly by the Department of Finance, and the monthly report on collections by the Bureau of Customs.

    The objective of the people whose job it is to craft press releases is not to exercise absolute candor, but to put the results that must be reported to the public in the best possible light.

    On a very basic level, what the government reports is not dishonest; the reports do contain facts which are accurate at the time they are published. Whether or not they are stated in a way that gives a reader who accepts them at face value an impression that accurately reflects reality is another matter.

    If you read or listened to most news reports about the two releases last Friday, you would have learned that the government recorded a P29.9 billion budget surplus in August, which reduced the cumulative budget deficit for the year to date to P25.9 billion, both figures being significant improvements on the govern­ment’s fiscal position at the same time last year.

    And although you would have received the bad news that the Bureau of Customs missed its collection target for August by P4.4 billion, it nevertheless continued its pattern of double-digit revenue growth this year, collecting some 11 percent or almost P3 billion more than it did in August last year.

    The picture these two news items paint, the picture the government undoubtedly wants everyone to see, is that the government’s books are in manageable shape if not exactly balanced, and that revenues are increasing. While it would be inaccurate to say that the government’s finances are unstable, the same data actually indicates they are not as rosy as the government would like us to believe.

    Among the various figures presented in the release about the government’s fiscal position is this one: P266 billion, which is the full-year deficit amount programmed into the government’s budget for 2014. Through eight months, the cumulative budget deficit should be P177.3 billion, but instead it is just P25.9 billion, less than 15 percent of what was planned. Every analyst who has offered any sort of forecast about the Philippine economy for this year has cited “weak government spending” as an obstacle to better performance, and now we can actually quantify the problem: The government has spent at least P151.4 billion less than it should have in the first two-thirds of this year, which works out to P227.2 billion for the full year, unless it decides to embark on a massive spending spree in the last quarter.

    Ramping up spending, however, might not be easy, because of the lag in government revenue collection. Earlier in September, the Bureau of Internal Revenue also reported it had missed its collection target in the same terms as the Bureau of Customs did last week—collections higher (by about 8 percent year-on-year in the BIR’s case), but the revenue goal still missed (by 10.5 percent, or almost P15 billion). And in the same fashion as the BOC, the BIR is falling behind its yearly goal; as of August the BOC is about 9 percent short of the total it should have collected through eight months, while the BIR is about 8.4 percent behind. On their current trajectory, these two bureaus will collectively shortchange the national budget by a little more than P159 billion by year’s end.

    Even if that revenue shortfall is accounted for and the national budget adjusted accordingly, the government has still underspent by close to P46 billion through the first eight months of 2014; in other words, the unexpectedly low revenue collections are not a valid excuse. To put the under­spending in some kind of perspective, that P46 billion (which is a conservative estimate) is approximately the same amount as the combined budgets of the Department of Health and the Department of Energy for this year.

    There are a couple of conclusions that ought to be taken from all this. First of all, it should remind the media, economic observers, and the general public, whether they are inclined to support the current government or not, to exercise a bit of critical thinking when assessing these routine performance reports—the same data can tell more than one story. Second, and more specifically, there is a clear problem with the Aquino Administration’s approach to financing. Were it not for the DAP and PDAF scandals, the Administration’s method could be simply criticized as over-cautious; the scandals, however, raise suspicions that there are ill motives involved. Either way, continual government promises to “ramp up spending” in the month or quarter to come have proven to be no substitute for actually engaging in the spending.

    The cautious approach does have one advantage in that it positions the country well to absorb the shocks from a general regional or global downturn. If that does not happen, however—and it appears unlikely, despite the various troubles in the world at present, in the foreseeable future—the country falls further behind its economic competition, which is reflected in persistently low foreign investment levels, trade volumes, and GDP per capita, among other things.

    ben.kritz@manilatimes.net.

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    5 Comments

    1. The Aquino government uses spending only for self interest. The economy is never a thought by this administration. The growth and improvement of the Philippines has never been thought of. Crooks and idiots are at the helm.

    2. Lets assume that this government is driven only by pure motives when its underspending- I know how hard that is but just bear with me for a moment. A deficit can only be funded with borrowings. Therefore, if you remove the deficit from the budgets during the years when we registered above average growth in GDP, what do you think the real growth would have been? The answer tells you that the growth was credit driven, not the result of real wealth creation. Simply put, subtract our liabilities from our assets and what will you get? Only the international banks and their chief bully boy the IMF are happy while our people are still mired in misery. If their product were slippers, we will be forced even with the threat of aerial bombing if necessary to buy their slippers. Their product is debt, so we are fooled into believing that to spend beyond our means is the way to heaven. It used to be called imperialism, now its called globalization. Get it?

    3. Cres Malifier on

      Another column that enlightens us non-economists and non-accountants.

      What is got is that this basic instability in our government’s budget position is worse than at any time during the maligned and unlamented Arroyo administration and yet the lying President and his favorite associate, the Budget Secretary, still maintain that they have introduced great reforms and performed wonderfully well.

      Aquino resign!

    4. The govt is holding off spending until it is close to the next election so they can use the money as largesse to their loyal allies who will use it as an “incentive” to get elected. Now you know how politics works in the Phils.

    5. The bottom line is all systems in the Philippines was a total failure since we attained independence. Our political system failed to produce leaders that could have developed our country progressively instead we developed all kinds of family dynasties at the expense of the people. We borrowed money from World bank, IMF, etc not for real industrialization, reforestation, population control and for long term infrastructures (like they did in South Korea) but only to enrich political dynasties and the few rich oligarchs.