Philippines to Slow 2010 Budget Expansion Amid Revenue Threats
The Philippines plans a smaller increase in its 2010 spending plan as it seeks to narrow a record budget deficit while new tax measures trim revenue, government officials said.
The government may propose a “modest” budget of about 1.5 trillion pesos ($31.2 billion) for 2010, Budget Secretary Laura Pascua said in an interview yesterday in Manila. That would be an increase of less than 1 percent and compares with planned spending of 1.489 trillion pesos this year, which is 17 percent higher than 2008.
“It’s time to go back to the path of fiscal prudence,” Pascua said. “By then, the crisis would have probably tapered down and we’ll no longer need as much pump priming.”
President Gloria Arroyo had to forsake a plan to balance the budget last year when the global recession prompted her to boost public spending to revive slowing growth. The government aims to narrow next year’s deficit to 208.4 billion pesos as the economy recovers, from an estimated 250 billion pesos in 2009 that would be the biggest since 1985 when Bloomberg data began.
“It’s very, very important to go back to a fiscal consolidation phase to get investors’ confidence back,” said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. “It’s crucial to preventing a downgrade” in credit ratings, she said.
The world’s recovery from its deepest slump since the Great Depression may help the Southeast Asian nation accelerate growth to a range of 2 payday loans.6 percent to 3.6 percent next year from as little as 0.8 percent in 2009, the government predicts.
Election Spending
Expansion in the $144 billion economy will probably be faster in 2011 or 2012, Economic Planning Director Dennis Arroyo said in a separate interview yesterday.
Improving economic growth, helped by election spending, will reduce the need to increase public outlays next year, said Lorenzo at ATR-Kim Eng.
State spending may also be constrained by “looming revenue threats” from 10 proposed legislative measures that will prevent the government from increasing tax collection, Finance Director Ma. Teresa Habitan said.
The government plans to create more tax-free zones to boost investment and reduce its share of energy royalties to reduce power costs. Along with other proposals including abolishing documentary stamp tax and other levies on insurance policies and overseas remittances, these measures would deprive the government of about 51 billion pesos in revenue, Habitan said yesterday during a government budget planning session.
“During election season, there’s a tendency to approve revenue measures that would be more popular,” Pascua said. These would tend to reduce taxes, she said.
The Philippines holds national elections next year. The 2010 budget will be presented this quarter to Congress for approval.
Filed under: business by Wolf