Fitch sees RP deficit of P320 billion

MANILA, Philippines - Fitch Ratings expects the Philippines to post a budget gap of P320 billion this year, above the revised budget gap projection of P300 billion,because of weak revenues.

Andrew Colquhoun, head of Asia-Pacific Sovereigns for Fitch, said that the Philippines has pressing infrastructure and investment need to be addressed even as it raised this year’s deficit projection to P300 billion.

“A government decision to save rather than spend excess revenues would clearly benefit the public finances in the short term. However, the Philippines has pressing infrastructure and investment needs,” he said.

The Development Budget Coordination Committee (DBCC), the group that sets the country’s macroeconomic assumptions, has revised the budget deficit ceiling to P300 billion this year from P293 billion previously following a revision in the economic growth target.

The DBCC revised upward the gross domestic product (GDP) growth target for the year to five percent to six percent from 2.6 percent to 3.6 percent previously.

Fitch has assigned a ‘BB’ rating or below investment grade, on the Philippines with stable outlook.

Colquhoun said the “more pressing rating weakness in the Philippines is the low government revenue take.”

The government has incurred a budget deficit of P162.1 billion from January to May, above the first half deficit ceiling of P145.2 billion and above the budget gap recorded in the same period last year of P123.2 billion.

In May alone, the budget deficit hit P30.5 billion, more than double the P11.4-billion deficit incurred in the same period last year or an increase of 168.2 percent, largely because of higher expenditures.

The government is counting on the Bureau of Internal Revenue (BIR), its main revenue agency, to boost collections and meet its revenue goal of P830 billion for the year.

BIR Commissioner Joel Tan-Torres said last week that collections are just less than two percent off the target on the back of continued improvements in tax administration efforts.

Preliminary data last Friday showed collection at P65 billion or just P1 billion away from the P66-billion target for June.

The latest collection is already P5 billion above the P60 billion collected in the same month last year.

Since December last year, the BIR, which collects roughly two-thirds of government revenue, has been exceeding its monthly collection targets.

However, in May, BIR collections fell short of the target by P800 million or one percent, hitting only P79 billion.