‘Fiscal deficit to grow as spending supports growth’


THE Philippines is likely to see a wider fiscal deficit of as much as 2 percent of gross domestic product (GDP) this year as spending to support growth will continue even as the government goes through a political transition, a global investment research firm said.
The fiscal deficit last year stood at 0.9 percent of GDP.

Nomura Global Economics in a report highlighted the increase in government spending in the first quarter from the fourth quarter of 2015, while noting that revenue collection as of March fell short of expectations.

“We reiterate our 2016 fiscal deficit forecast of 2 percent of GDP as we expect the fiscal support for growth [i.e., government spending] to continue for the rest of this year despite the political transition,” the report said.

As of the first quarter, the fiscal deficit grew to 1.5 percent of GDP on a 12-month rolling sum basis from 0.9 percent in the fourth quarter of 2015.

Explaining its view, Nomura said the recently released Philippine fiscal accounts for March “indeed showed that the government’s fiscal support for growth increased in the first quarter of 2016 against the last quarter of 2015.”

Increased Q1 spending
Nomura offered a 6.5-percent growth forecast for the Philippine economy in 2016 at the beginning of the year, which is higher than the 5.9-percent result in 2015, but below the government’s official target range of 6.8 percent to 7.8 percent for this year.

The research firm noted in particular that government spending increased by 23.2 percent year-on-year in March from 21.9 percent in February, bringing the increase in the first three months of this year to 17.3 percent from 14.2 percent in the last three months of last year.

Excluding interest payments, government spending increased faster in January to March period, at 21.2 percent after 18.4 percent in the October to December period, it noted.

Wider deficit
Nomura added, “revenue collections, however, disappointed in March, falling by 7.8 percent year-on-year after rising 4.7 percent in February.”

For end-March, revenue collections increased by a more modest 1.8 percent versus 4.2 percent in the fourth quarter.

Increased spending, combined with weaker revenue collections, widened the budget deficit of the national government to P74.38 billion in March, significantly higher than in February and a year earlier.

The deficit stood at P34.62 billion in February and P17.37 billion in March 2015.
National government expenditure grew to P232.18 billion, exceeding revenues of P157.8 billion. Interest payments on government debt also increased by 18 percent.

“For the first quarter, the deficit widened to P112.5 billion (1.5 percent of GDP on a 12-month rolling sum basis) from P96.1 billion (0.9 percent of GDP) in the fourth quarter,” it noted.


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