Philippines Posts Third Budget Deficit on Spending

By Francisco Alcuaz Jr.

Dec. 19 (Bloomberg) -- The Philippine government posted its third straight monthly budget deficit in November as it boosted spending to counter the global recession.

The shortfall was 4.3 billion pesos ($92 million) last month, Finance Secretary Gary Teves said in Manila today. That compares with an 8.96 billion-peso deficit in October and a 54.1 billion-peso surplus a year earlier, when the government sold geothermal producer PNOC Energy Development Corp.

President Gloria Arroyo in May scrapped her plan to end 10 years of annual budget deficits this year, estimating a 75 billion-peso shortfall as she boosted spending to help Filipinos cope with inflation and slowing economic growth. Economic Planning Secretary Ralph Recto said last month the budget may only be balanced in 2011.

“They are supposed to be spending,” said Song Seng Wun, an economist at CIMB-GK Securities Pte in Singapore. “It’s probably the appropriate policy stance for governments looking to cushion the domestic economy from the effects of the global slowdown, as private-sector spending declines.”

Philippine economic growth unexpectedly accelerated in the third quarter as remittances from overseas nationals climbed at the fastest pace in seven years. Still, the government predicts expansion in 2009 may cool to the slowest pace in eight years as the global recession damps demand for Philippine goods, workers and services.

Spending rose 20 percent to 113.4 billion pesos in November. In the first 11 months of the year, the government outlay increased 11.3 percent.

‘On Track’

Revenue fell 27 percent to 109 billion pesos last month from a year earlier, when income was boosted by the government’s sale of PNOC Energy for 58.5 billion pesos. For the first 11 months, revenue rose 3.6 percent.

The Philippines is “on track” to ensure this year’s budget deficit doesn’t exceed 75 billion pesos, Teves said. The government is scheduled to sign an agreement to sell its Petron Corp. stake this afternoon and expects the 25.7 billion-peso payment on or before Dec. 24, the last business day of the year, he said.

The government plans to “sustain the improvement” in spending and will review next year’s 102 billion-peso deficit ceiling in the next few months, Teves said. It may borrow more than planned if the 2009 deficit exceeds targets, he said.

The Philippines exempted more workers from income taxes starting July, a move estimated to cut revenue by 10 billion pesos this year and twice that amount next year. Corporate income taxes will fall to 30 percent next year from 35 percent.

Still, the Philippines plans to sell natural-gas producer PNOC Exploration Corp. and the government’s Food Terminal Inc. property for 10 billion pesos each in the first half of next year, Teves said.

The government had a budget deficit of 66.7 billion pesos in the first 11 months compared with a surplus of 12.6 billion pesos a year earlier.

To contact the reporter for this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net