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Fiscal deficit remains ‘manageable’ — Dominguez

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Finance Secretary Carlos G. Dominguez III

By Melissa Luz T. Lopez, Senior Reporter

THE wider-than-programmed budget deficit last year should not be a cause for concern, with authorities pointing out that infrastructure outlays as well as revenue effort are on the rise.

Finance Secretary Carlos G. Dominguez III said the P558.3-billion fiscal deficit remains “manageable,” following the release of official data from the Bureau of the Treasury on Friday.

The deficit was substantially wider than the P350.6-billion shortfall in 2017, and settled above the P523.7 billion programmed for the entire year.




The wider fiscal gap came as state disbursements reached P3.408 trillion, higher than the P3.37-trillion target for the year and spelling a 20.7% increase from the P2.824 trillion spent in 2017.

Economic growth reached a three-year low of 6.2% in 2018 despite the hefty spending, with officials pinning the blame on elevated inflation.

Meanwhile, total revenues amounted to P2.85 trillion to also settle a tad above the P2.846-trillion goal for the year. The amount likewise grew by 15.2% from the previous year’s collections worth P2.473 trillion, which came after the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law.

2019 DEFICIT
Despite the deficit breach, Mr. Dominguez said they expect to remain within the programmed fiscal gap for 2019 at P624.4 billion, equivalent to 3.2% of GDP.

“We’re confident of keeping within the target,” Mr. Dominguez said in a Viber message to reporters. “The delay in the approval of the budget is regrettable but we will strive to catch up during the rest of the year.”

Mr. Dominguez earlier said that the delayed passage of the P3.757-trillion spending plan meant pushing back P46 billion which should have been already spent by the national government in the first quarter.

For its part, the UnionBank Economic Research Unit (ERU) said the 2018 fiscal balance is “not alarming” thus far, but flagged that public spending will need to continue doing the heavy lifting for economic growth this year.

“With uncertainties from the external environment, ERU sees the government to continue to prop up the economy through continued spending and a welcome buoy to growth prospects is declining inflation,” said UnionBank chief economist Ruben Carlo O. Asuncion.

Mr. Asuncion, however, noted that the budget delays will affect public finances through the first semester, unless the Duterte administration succeeds in securing exemptions for a 45-day ban on public works ahead of the May 13 midterm polls.

GAINS MADE
Latest Treasury data also revealed that the state’s revenue effort rose to 16.4% in 2018, improving from 15.6% the previous year as collections matched the target.

The revenue effort also beat the 16.3% target for the year, and is the highest since 2007.

Broken down, tax effort also improved to 14.7% to mark its best showing in 20 years.

The share of expenditures to gross domestic product (GDP) also surged to 19.6% from 17.9% in 2017, well above the 19.3% target. Meanwhile, the interest payments burden went down to 10.2% from 11% previously.

“In sum, the quality of government spending has improved,” the Treasury said.

In a separate statement, the Budget department noted that infrastructure outlays in 2018 likely clocked in at 6.2% of GDP, lower than 2017’s 6.3% share but is seen on track to hit the 7% goal by 2022.

“This means that the country’s borrowings are financing worthwhile infrastructure investments that the Filipino people can look forward to enjoying,” Budget Secretary Benjamin E. Diokno said.

“Filipinos may really look forward to better roads, comfortable mass transport systems like trains and modern public utility vehicles (PUV), among other infrastructure initiatives. The data support the eye test, with so many construction projects going on around the country.”