Country Report Philippines April 2011

Outlook for 2011-15: Fiscal policy

The budget deficit will shrink as a percentage of GDP in 2011-15, but there will be not be a return to a balanced budget, as this would require larger improvements in the tax take than seem feasible. Although the budget deficit narrowed from the equivalent of 3.9% of GDP in 2009 to 3.7% of GDP in 2010, revenue fell to its lowest level in relation to GDP since the late 1980s. The 2011 budget, approved by Congress in December, has set a deficit target of 3.2% of GDP, based on the official growth assumption. The budget increased expenditure, notably on welfare, but it contained few measures to boost revenue. In 2011-15 the Economist Intelligence Unit expects the revenue to GDP ratio to stay below the level at which it stood before the 2008-09 global recession, while the fiscal deficit will remain relatively large, at an average 2.5% of GDP a year. Even though it is not targeting a balanced budget in the medium term, the administration will want to establish a reputation for economic competence among its foreign creditors, given that it depends on the global bond market to finance its deficits.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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