Tuesday, December 8, 2009

Deficit estimate raised to P320B


Original Story: http://www.tribune.net.ph/business/20091209bus1.html

The government acknowledged yesterday that the budget deficit will exceed P300 billion to as much P320 billion by the end of the year as a result of weak interest on properties that it expected to sell to augment state finances.

At P320 billion the deficit will equal four percent of gross domestic product (GDP), which will be more than what international institutions such as the International Monetary Fund (IMF) had indicated as a safe level to maintain fiscal health.

Finance Undersecretary Gil Beltran said the developing scenario is that without the sale of assets, the deficit would reach from P280 billion to P320 billion.

He expressed apprehensions that “given the late hour,” assets sales may come out less than what the government had projected.

IMF mission leader Il Houng Lee said at the conclusion of a recent assessment on the country that the recommendation was for the government to limit the fiscal shortfall to within 3.5 percent of GDP or P290 billion, adding that the latest fiscal data expose threat to sustainability over the near and medium term.

“The proliferation of incentives, removal of documentary stamp taxes, the successive typhoons and the Personal Equity and Retirement Account (Pera) Law are among the factors eroding tax collections,” Lee said.

He said the government resist from increasing public servant wages as such expenses “will crowd out public investments and put additional pressure on the deficit.”

“The mission recommends containing the deficit at 3.5 percent of GDP by maintaining civil service wage costs and public investments at projected 2009 levels and by introducing new legislative and administrative revenue measures,” he said.

“New revenue eroding measures should be resisted,” Lee said.

Lee added tax collection as percent of economic output should drop lower than last year’s 14.1 percent of GDP to around 12.7 percent due to the revenue-eroding measures. “This is really our main concern,” Lee said.

Analysts have also lately ramped up deficit projections to as much as P350 billion this year. The government had set a shortfall limit next year at P233 billion or 2.8 percent of GDP.

In the first 10 months alone, the budget had exceeded its full-year limit of P250 billion, or 3.2 percent of GDP. Finance Secretary Margarito Teves, however, said asset sales would limit the deficit to below P300 billion by the end of the year.

The government had repeatedly failed to sell the 103-hectare Food Terminal Inc. lot in Taguig City that it expected to raise around P13 billion.

It is also expected to encounter legal problems on its plans to sell preferred shares in food conglomerate San Miguel Corp. which is expected to generate P56 billion.

Original Story: http://www.tribune.net.ph/business/20091209bus1.html

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