MANILA – While there are concerns over the state’s ability to boost growth given the rise in consumer prices and interest rates, data on Friday showed that the government was able almost balance in budget in July because of lesser expenditures.
This supports that recently released data that showed the government’s inability to contribute to economic growth in the second quarter of the year.
“We’d rather see (bigger) budget deficits at this point in time… They are unable to provide the type of lift we need now that the economy is facing headwinds,” said Bank of the Philippine Islands (BPI) economist Nicholas Mapa during an interview.
On Friday, treasury data revealed that the country’s budget deficit fell to P1.8 billion in July, down by 97 percent year-on-year. Revenue increased by 15 percent, while spending fell by 15 percent as well.
Since the beginning of the year until July, the deficit amounted to P55.7 billion, lower than 2013’s P104.5 billion.
One of the main drivers of economic growth this year is government spending because of the size of the infrastructure package in the budget.
The government shared that it has plans of spending P404.3 billion for construction of new roads, bridges, and other infrastructure projects.
According to the International Monetary Fund (IMF), the country’s growth targets remained “contingent” on their capacity to spend.
During the second quarter of the year, the economy increased by 6.4 percent, higher compared with first quarter’s growth of 5.7 percent. For 2014, the country targets to grow the economy by 6.5 to 7.5 percent.
Earlier, officials blamed the government’s lack of ability to stick to its spending program.
However, Finance Secretary Cesar Purisima remains optimistic because he is focused instead on the state’s revenue growth.
Collections increased by 12 percent year-on-year to date.
“We have maintained this trend of faster revenue growth than nominal GDP growth since 2011,” Purisima said in a statement.
Mapa noted that authorities should accelerate disbursements to answer the issues that make it difficult for them to spend.
“Now that they have the money, they should be spending it. No other government has had the kind of fiscal space we have now,” Mapa said.