Philippines: 3% deficit-to-GDP reasonable: DBM

  • THE GOVERNMENT will maintain its fiscal deficit ceiling at about 3% of GDP despite concerns expressed by the International Monetary Fund (IMF), noting that higher-than-expected government revenue will keep the deficit in check.
  • “To me that’s reasonable. We’re not being extravagant… As long as we keep it under 3% things will be all right,” Budget Secretary Benjamin E. Diokno told reporters on 1 Oct 18.
  • In 1H18, revenue and expenditure both grew 20% y/y and were 8% and 2% above target, respectively, keeping the deficit 27% below initial programmed levels.
  • The IMF in its periodic assessment of the Philippines “urged” the government to maintain a “neutral” fiscal deficit position of 2.4% for 2018 and 2.5% in 2019, against the 3% set for 2018 and 3.2% for 2019. In 2017 the deficit was 2.2% of GDP.
  • The IMF proposed spending cuts, focusing on items financed by special-purpose funds, and those unrelated to its priority infrastructure projects.
  • Special purpose funds are lump-sum provisions in the national budget that are given to various agencies for projects or allocations which are not yet identified during national budget preparation, such as pension payments, subsidies to government-owned corporations, among others.
  • But Mr. Diokno said that the special purpose funds include calamity funds, which he said were needed to respond to disasters.
  • “Just recently we had typhoons… so let’s see. We decided not to follow (the IMF’s recommendations),” Mr. Diokno said.
  • Mr. Diokno said that the multi-agency Development Budget Coordination Committee will convene in two weeks to review its macroeconomic assumptions after the latest developments in the economy.

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