HSBC: PH deficit to hit 2.9% of GDP
The government’s budget deficit will likely fall below the government’s programmed caps for this year and the next, banking giant HSBC said on Friday.
“We expect the budget deficit to rise from 2.2 percent of GDP (gross domestic product) in 2017 to 2.9 percent this year and next,” it said in a report.
The government has set its deficit ceiling at 3 percent and 3.2 percent of GDP for 2018 and 2019, respectively.
HSBC said that for 2018 alone, the deficit increase will be due to infrastructure outlays.
“The Duterte administration has significantly increased the pace of government expenditures and infrastructure spending this year,” the lender said.
Infrastructure and other capital spending by the government climbed to P352.7 percent for the first half of the year, latest data showed, 4.3 percent higher than the P338.3 billion target for the period.
The main takeaway, HSBC said, is that further fiscal impulses should be expected going into 2019.
“That said, nearly all the additional fiscal stimulus is destined for infrastructure — with total infrastructure spending expected to reach 7.4 percent of GDP by the end of President Duterte’s term,” it said.
“This is ultimately a positive development for the country,”
It also noted that the government’s shift to an annual cash-based appropriations system, from an obligation-
based system, for the 2019 budget was expected to quicken program delivery and strengthen agency accountability.
Under the cash-based system, obligations or contracts for programs, activities and projects for implementation during the fiscal year should be fully delivered, inspected and accepted by the end of the said year.
Lastly, the lender also warned that “a recent Supreme Court ruling to increase national revenue allotments for local government units and/or an abrupt shift to federalism may curb government spending on infrastructure projects in the near-to-medium term.”
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