Barclays revises downward 2011 deficit forecast for Philippines

MANILA, Philippines – Barclays Capital revised downward its 2011 full year deficit forecast for the Philippines on account of the lower-than-programmed budget gap in the first quarter this year, the Philippine News Agency reported on Wednesday.

It said in a report dated May 3, 2011, the investment bank now sees P275 billion deficit for the country this year, lower than its P300 billion forecast earlier. The new forecast accounts just under three percent of gross domestic product.

The government’s deficit ceiling this year is P300 billion and accounts for 3.2 percent of GDP.

In the first three months this year, deficit totaled to P26.2 billion, 80.48 percent lower than-year ago’s P134.18 billion and is 85.8 percent lower than the P111.99 billion set for the three-month period, on account of the combined effect of lower-than-programmed disbursement and increase in tax collection.

Revenues rose by 21.54 percent to P323.08 billion against year-ago’s P265.8 billion. This is 3.81 percent higher than the P319.27 program for the quarter.

While expenditures posted a decline of 12.7 percent year-on-year after it amounted to P349.28 billion compared to the P400 billion in the first quarter this year. Against the programmed 2011 first quarter spending, the actual figure is 81.98 percent lower than the P431.26 billion.

Also, interest payments last March declined by 17.96 percent to P32.73 billion against year-ago’s P39.9 billion. The first quarter level is lower by 16.7 percent after it amounted to P90.72 billion against the P109.9 billion in end-March 2010, 10.53 percent lower than the P101.25 billion programmed for the quarter.

Barclays cited the government’s move to further increase revenues through among others pegging sin tax on inflation and the simplification of the tax structure.

“If these are successfully implemented then the risks to budget deficit projection are biased further to the downside,” it said.

Barclays also said that for the government to meet its deficit ceiling this year, “it will need to post average budget deficit of P91.3 billion in each of the remaining three quarters.”

“While the government has indicated that spending will be ramped up in Q2 and Q3, we believe achieving the capital outlay plans for the year may be challenging,” it added.