Gov’t admits balanced budget remains a dream

03/27/2008

The Arroyo administration floated yesterday the possibility it will miss a long trumpeted balanced budget target this year, blaming a slowing global economy and massive spendings needed to avert a food crisis amid the rising price of rice and crude oil.

Budget Secretary Rolando Andaya told reporters at the sidelines of a development forum held yesterday at the Clark special economic zone that the need for accelerated spending will put more pressure on revenue and threaten the balanced budget target.”

The Department of Finance (DoF) also indicated that a massive pump priming effort with the assistance of state-owned banks is being lined up for the first quarter to cushion the economy from an expected slowdown in the United States, the country’s main trading partner and a major source of investments.

The budget posted a deficit of P13.9 billion in January while the government revised upward the fiscal gap at the end of last year to P12.4 billion from the initial P9.4 billion, which was still far lower than the original P63-billion target.

The government, however, toward the end of the year stated that a balanced budget could have been possible if not for infrastructure spending late last year.

President Arroyo said in the same forum that she expects a rough patch ahead for the country as global economic growth slows amid soaring oil and rice prices.

After a 31 year-high 7.3-percent economic growth last year, “there are clouds on the economic horizon that we must guard against. The global economy is facing significant challenges,” Arroyo said.

Rising energy and rice prices “are putting more strain on our working poor as prices for commodities like rice and fuel increase,” she said.

“We’re working to soften the blow from the current global economic challenges to those working the hardest to make it to the middle-class.”

She said economic reforms laid over the past three years to improve the government’s revenue base made the country “well-positioned to weather a global economic slowdown which, unfortunately, will affect all of us.”

Finance Secretary Teves said “the emerging US slowdown and rising food and energy prices threaten economic sustainability.”

Mrs. Arroyo said government efforts to build roads, bridges, ports and educational facilities should serve as a “buffer to mitigate the pain of a deteriorating global economy and the accompanying rise in prices.”

Teves said the P1.2-trillion national budget would allow the government to raise its capital spending to 2.7 percent of the gross domestic product (GDP), from of 2.5 percent of GDP last year.

He said, however the government’s principal revenue bodies, the Bureau of Internal Revenue and the Bureau of Customs, must raise collections by 10.3 percent to P845 billion and by 11.5 percent to P254 billion respectively.

Some 10.3 percent of expected revenues would come from non-tax sources including sales of government assets, he added.

The government posted a 21-year low budget deficit of P12.4 billion or 0.2 percent of GDP last year.

The government has said growth this year is likely to taper to 6.3 to 7 percent because of the slowdown in the US, the Philippines’ largest trading partner.

But the country’s economic planning secretary said this lower target might also be revised down.

“The Development Budget Coordination Committee is reviewing it,” Augusto Santos said.

He added the number may be revised downward because of the slowdown in developed economies and a fall in agricultural production because of climate change.

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