Philippines hits PHP2.5b budget surplus

As total revenues rose 4.2% and spending rocketed 10.4%.

According to Maybank Kim Eng, the national government posted a budget surplus of PHP2.5b in August as total revenues increased 4.2% while expenditures grew 10.4%.

Here's more from Maybank Kim Eng:

It is the third monthly surplus and the smallest one thus far this year. August, like April, is usually a time for budget surpluses. While April is when income tax payments are due, August is among the peak months for typhoons which contribute to construction work disruptions and thus likely lead to lower government spending.

This year, heavy monsoon rains and a typhoon caused widespread floods in August. Still, the August surplus is 73% YoY smaller than last year’s PHP9.2b.

Budget secretary Florencio Abad believes the announcement of the withdrawal of unused budget allocations by 30 September will compel government agencies to pick up the pace of spending in the last few months of the year.

However, funds that remain unspent will then be reallocated to faster-moving programs and projects. According to the DBM it will soon announce these reallocations.

To-date the budget deficit is PHP71.2b, well below the deficit target of PHP280b (2.6% of GDP) this year. Although the government expects spending to pick up in the next few months, future monthly deficits are probably not going to be substantially large.

One is because spending started accelerating in 2H11 so growth going forward will come from a rising base. Second is that payment for the privatization of the Food Terminal Inc complex is 60 days from the award. The total purchase price including VAT is PHP27.25b of which PHP21.8b is to be paid in November.

We think that these will contribute to the actual 2012 budget deficit undershooting the target as well as our forecast of PHP239b. As a result, we believe government spending will not be enough to completely offset the dampening effect on the economy of weaker external demand that is forthcoming as a result of slowing global growth.