Narrow PH budget deficit seen in 2019
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Sun, 11 Aug 2019 16:17:31 +0000
The Philippine government is likely to post a narrow fiscal deficit this year because of the delayed approval of the 2019 national budget, Moody’s Investor Service said.
“We expect the fiscal deficit to narrow significantly to around 2 percent of GDP (gross domestic product) in 2019 before widening to 3.0 percent of GDP in 2020, largely reflecting the negative impact of the budgetary delay earlier this year amid continued revenue increases,” the global debt watcher said in a report released late last week.
Moody’s outlook for the budget deficit is lower than the 3.2 percent of GDP programmed by the interagency Development Budget Coordination Committee.
The latest projection is lower than last year’s actual budget deficit of 3.3 percent of GDP.
A dispute between Congress’ two chambers over alleged insertions resulted in the four-and-a-half-month delay of the passage of this year’s budget. This forced the government to run on last year’s budget, limiting it to spend for items detailed in the 2018 outlay and not on programs and projects supposed to be implemented this year.
“Moreover, there was a prohibition on the construction of public works and the disbursement of public funds in the 45-day period prior to the midterm elections held in May,” Moody’s added.
As a result, the credit rater noted that non-interest expenditure declined 1.9 percent year-on-year in the first six months of 2019, as compared with the strong 21.9 percent expansion over the same period in 2018.
It also mentioned that the fiscal balance in the first half of 2019 totaled P42.6 billion given buoyant revenue growth.
“Although the government has formulated aggressive catch-up plans for spending in the second half of the year, it is unlikely to fully execute its budget,” Moody’s also pointed out.
The country’s economic managers earlier set a “catch-up plan” that set an infrastructure spending target of P792.97 billion for the second to fourth quarters after actual infrastructure spending reached P207.2 billion in the first.
The Department of Finance has also reported that infrastructure spending during the first half of the year only reached P311.4 billion as against the programmed allocation of P392.9 billion, or an underspending of P81.5 billion.
Nevertheless, Moody’s stressed that in light of the budget delay, the validity of the appropriations for infrastructure spending in the 2019 budget have been extended to the end of 2020.
“As such, we expect the residual spending on infrastructure approved in the 2019 budget to combine with the appropriations in the upcoming 2020 budget to lead to a significantly larger fiscal expansion next year,” it said.