Huge budget deficits seen

The national government is set to post record budget deficits in 2009 and 2010 with revenues dampened by the slow global economic recovery and spending boosted by cost of reconstruction after last year’s typhoons.
Finance secretary Margarito Teves said last week the government had yet to decide whether it would raise its foreign borrowing plan for 2010, but reiterated the government may borrow more at home to cover a higher fiscal shortfall.
“For 2010, we are looking at about 293 billion,” said Teves, adding that the shortfall would amount to 3.5 percent of gross domestic product.
He said 2009’s record deficit was a result of “a combination of unfavorable external developments as manifested by the global financial crisis, some revenue eroding measures and the need to continue with the stimulus”.
“There is still a need to provide economic stimulus, including some rehabilitation and reconstruction efforts for the damage caused by Pepeng and Ondoy.”
Last year’s shortfall would probably reach 293 billion pesos or 3.5 percent of GDP, Teves said, adding the worst case was a deficit of as much as 298 billion pesos.
Independent analysts forecast the country’s 2010 fiscal shortfall would reach 278 billion pesos.
To fund the deficit, the government will borrow $3.8 billion overseas, $2 billion of which would come from bond issues. The national government is preparing for a possible global or euro and yen bond sale this January.
“Additional borrowings will come from domestic sources, but we will fine tune this,” Teves said. “We will have to consider the effects on interest rates, we don’t want to crowd out the private sector, we also want to see how interest rates are moving in the international market.”
The government was hoping to sell some government assets, mostly in real estate and shares in the state-run oil and gas exploration firm, within the first quarter to raise 30 billion pesos, he said.
That would make up for some 40 billion pesos in revenue losses from recent measures passed by Congress, such as a higher individual income tax exemption and the scrapping of a tax on stock certificate issues.