Encouraging July Fiscal Numbers

PHILIPPINES - In Brief 09 Sep 2013 by Romeo Bernardo

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There are a number of positive signals that can be gleaned from the July fiscal performance report, including: 1. Commendable increases in tax revenues, with BIR and BoC collections rising 20% and 13.5%, both above their first half growth rates of 14% and 1.2% respectively.  Coming from its flattish 1H13 performance, the rise in BoC inflows is particularly noteworthy, in part reflecting the beneficial impact of the peso’s depreciation – 3.3% yoy for July – on import values.  It may also hint at an increase in imports that would signal more economic activity and even some export recovery.  While we had been looking forward to administrative gains following the President’s SONA, we are not very hopeful that this is a big driver to the higher collections.   2. Robust spending growth reported at almost 22%, again higher than 1H13 growth of 12%.  This points to government’s continued expansionary stance in support of the economy’s high growth.  July expenditures comprise 40% of the third quarter programmed spending.   3. Despite a higher P53-billion July deficit, the seven-month overall deficit stands at P104.5 billion, just 44% of the full-year target.  While yields on treasury securities have risen in the secondary market, government’s healthy cash position* puts it in a good position to manage funding requirements ahead.  [*based on (1) over P500 billion in "liabilities to central government" reported in July BSP depository corporations survey and (2) P150 billion raised from an August offering of retail treasury bonds]