Government Spending Slows; Inflation Up

PHILIPPINES - In Brief 05 Dec 2013 by Romeo Bernardo
Government reported today an P11.2 billion deficit in October bringing the year-to-date overall deficit to P112.5 billion, less than half the programmed P238 billion deficit for the year.  Year-on-year changes in October revenues were flat, with growth in BIR collections slowing to 11% vs. over 20% in the last quarter, while non-interest expenditures inched up by a mere 0.4% from over 13% growth the previous quarter.  Based on the latest budget department report showing a 7% fall in September outlays for infrastructure, we think October expenditures may reflect continuing declines in this unfortunate collateral damage of the PDAF/DAP controversy, something we telegraphed in our earlier reports.  With the deficit much less than programmed, government has opted to reject offers during the auction of its five-year bonds last Tuesday with some bids reportedly as much as 225 bp above secondary market rates.  The Department of Finance is considering an international bond sale of as much as US$1 billion early next year.Meanwhile, November inflation was reported at 3.3% today, up from 2.9% the previous month. We expect to see inflation continuing to rise in the coming months due to crop damages caused by Typhoon Haiyan.

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