Philippine fiscal deficit hits PHP34.5bn

This is below government's target of PHP109.3bn.

According to Nomura, the fiscal deficit in H1 was PHP34.5bn or 2.1% of GDP on a 12-month rolling sum basis. This is well below the government‟s H1 deficit target of PHP109.3bn, the lion's share of which (i.e.,PHP89.9bn) was due to an underperformance in government expenditures. However, compared to last year, expenditures rose by a much faster 13.6% y-o-y after rising by only 2.3% in 2011.

Here's more from Nomura:

We estimate that the fiscal impulse turned positive in H1, which means that fiscal policy has become expansionary, reversing last year‟s trend and hence has started to boost GDP growth. Yet we see scope for stronger fiscal support this year, with the government addressing spending bottlenecks and increasing overall expenditures. We maintain our 2012 fiscal deficit forecast of 2.8% of GDP.

Additionally, the quality of spending continues to improve, in line with our expectations. Capital outlays rose by 45.6% yoy, far outpacing the 8.5% increase in current expenditures excluding interest payments.