Small deficit better for RP – Cuisia

The Philippines would be better off posting a smaller deficit this year instead of balancing the budget, Philamlife president and chief executive officer and former central bank governor Jose Cuisia Jr. said yesterday.

Cuisia said the government should instead boost spending on infrastructure and social services.

“I don’t see any reason why we should have a balanced budget. Other countries doing well have small deficits,” Cuisia told reporters yesterday during the launch of Philamlife’s new variable product called AIG Asset Builder.

He said that the government is not spending enough on infrastructure and social services.

Cuisia said a major key in solving the government’s fiscal woes is for the government to increase tax revenues by enhancing the collection efficiency of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).

Finance Secretary Margarito Teves has said that nothing is final yet and that the government has not yet changed its plan of balancing the budget this year.

Analysts have already cautioned the Philippines against rushing to achieve its balanced budget goal this year, saying that the country would be better off posting a smaller deficit so that it has more funds to spend on projects that would pump-prime the economy.

Teves earlier said that the Department of Finance (DOF) would reassess the situation given the economic slowdown in the US.

Earlier, United Kingdom-based Standard Chartered Bank said the government would be better off by posting a smaller deficit this year instead of a balanced budget so that it can spend on infrastructure projects that would boost the economy.

The bank warned that without more effective tax reforms and more aggressive asset sales, the government may find it tough to achieve its fiscal targets with a slowing economy.  HSBC economist Frederic Neumann also earlier said the same thing, noting that the government should boost spending on crucial areas such as infrastructure.