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By Chino S. Leyco, Reporter
THE Philippines has put off a government plan to
balance its budget this year, the country’s economic managers said
Wednesday. Besides postponing its fiscal program, the Development
and Budget Coordinating Committee (DBCC) also cut the country’s
economic growth target in light of rising inflation and a slowdown
in its largest export market, the US.
The inter-agency body, which sets the
country’s macroeconomic goals and assumptions, cut its gross
domestic product (GDP) growth forecast this year to between 5.7
percent and 6.5 percent, from the original 6.3 percent to 7 percent.
Inflation is expected to average from 5.5 percent to 6.5 percent,
higher than the earlier 3 percent to 4 percent range. This is on
account of a higher forecast for Dubai crude, the country’s
benchmark for the commodity at between $95 and $105 per barrel, from
$80 to $90 a barrel previously.
Budget Undersecretary Laura Pascua said the DBCC
expects the exchange rate to range from P42 to P45 against the US
dollar, while exports and imports are seen growing at 6 percent and
7 percent, respectively. The government earlier set an 8 percent and
9 percent expansion of exports and imports
Finance Secretary Margarito Teves said the DBCC
is looking at a P75-billion budget deficit this year due to demands
for higher public spending to cushion the impact of skyrocketing oil
and rice prices.
“We are prepared for a budget deficit of not
more than 1 percent of GDP. If we take the GDP of around 7.5 as of
2007, it would not be more than P75 billion,” Teves told reporters
on the sidelines of a forum.
He said the government is targeting a zero
budget gap scenario by the end of President Arroyo’s term in 2010.
Second round of foreign borrowing
“It’s something that we don’t want to, but
we’re prepared to and we’re still hoping that it would be lower
than that. The prospects right now of a balanced-budget given the
very difficult circumstances, are not really bright,” Teves said.
Despite the deferment, the finance official said
the tax revenue target of the Bureaus of Internal Revenue (BIR) and
of Customs remain intact at P1.1 trillion, adding the government
expects an P18.6-billion revenue windfall from the 12 percent value
added tax (VAT) on oil.
He, however, did not rule out a lower deficit of
P30 billion this year and a balance budget by next year provided the
BIR and Customs exceed their collection targets
“It can be 2009, depending on how we’ll
handle 2008. But I’m saying that the worse we’re expecting
really, is not more than 1 percent of GDP,” the official said.
Teves said the government will undertake a
second round of foreign commercial borrowing this year, adding the
issue may range from $500 million to $750 million.
“But we would like to find out if we can still
increase the [disbursement] of [the] ODA component, because [it] is
cheaper. So we’ll see if we can get more of the quick disbursing
project loans,” he said, referring to official development
assistance or foreign donor aid, which carries lower interest rates.
Pascua said the government is prepared to spend
P1.236 trillion, plus the additional windfall of P18.6 billion from
higher VAT on petroleum products.
Impact to depend on size of fiscal slippage
James McCormack, Fitch Rating Inc. head for
Asia-Pacific Sovereigns, said the deferral has no impact on the
Philippines’ ratings.
“Since we were not assuming the budget would
be balanced this year, Fitch takes no issue with official
projections being revised to reflect the change in circumstances,
particularly as they now coincide with our own views,” McCormack
said in an email to The Manila Times.
Agost Benard, Standard & Poor’s Ratings
Services associate director declined to comment, saying, “I have
not seen details of this statement, or the reasons given by the
government for the postponement of the balanced budget goal.”
He, however, said that any potential impact on
the ratings would depend on the combination of the reasons for the
postponement of the balanced budget goal—whether it will be due to
revenue or expenditure side changes—and the magnitude of the
expected fiscal slippage.
“Put differently, one would need to see
details of the revised plan and weigh up if the change in fiscal
goals is still consistent with the overall goal of fiscal
consolidation,” Benard said in a separate e-mail sent to The
Times.
-- With Darwin G. Amojelar
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