The government is likely to achieve its budget deficit target this year as it pursues strong spending to keep overall growth at 6 percent or higher, Dutch financial institution ING Bank said.
“We expect government to keep the deficit at 2 percent of GDP [gross domestic product],” ING Bank senior economist Joey Cuyegkeng said in his latest market views.
The Development Budget Coordination Committee has set a government spending target of P2.992 trillion this year, while revenue was pegged at P2.969 trillion. This will result in a P296.2 billion budget deficit of 2 percent of GDP.
The final budget balance for 2015 has not been disclosed, as the government has yet to release the overall 2015 cash operations report.
“The 2016 performance is promising as government reported that almost 100 percent of the budget of government agencies has been released,” Cuyegkeng said.
The economist said salary increases of government employees and higher allowances for the military and the national police would be released soon would likely generate higher consumption spending.
Preliminary data from the Department of Budget and Management (DBM) showed a total of 98.7 percent or P2.573 trillion of the 2015 P2.606 trillion budget was already released to government agencies for spending.
The DBM also announced earlier that a total of P24 billion would be released to agencies to implement the compensation adjustments for civilian personnel and additional allowances for military and uniformed personnel (MUP).
Of the P24 billion, P18.64 billion will augment the compensation of civilian personnel, while P5.36 billion will go to the allowances and hazard pay of MUP.
The remaining P33 billion appropriated for compensation adjustments has been set aside for newly-filled positions, and for the mid-year bonus, which will be released not earlier than May 15 of this year, the agency explained.
Add to this election-related spending, Cuyegkeng said government spending would more than offset the impact of El Niño in terms of overall economic impact and employment.
“Reports of the impact of El Niño have not been as severe as expected. But we may need to wait for the final report of the government,” he said.
Another positive development, he noted, was that infrastructure spending continues while awarded public private partnership projects get into higher gear.
“The risk to our growth expectation is a disaster in the trade sector and a very severe El Niño impact. We believe that the risks are limited and are likely to be more than offset by a robust domestic demand growth,” Cuyegkeng said.
ING forecasts 2016 GDP growth to accelerate to 6.2 percent from 5.8 percent last year.