Philippines on track to limiting budget gap to 3.1% of GDP Concerns about Philippine fiscal sustainability is “no longer warranted” as government spending is now under control and the budget deficit is on a downtrend, according to the International Institute of International Finance (IIF). The fiscal performance so far this year, according to the Washington DC-based global association of financial institutions, bodes well for the government to achieve its target of reducing the budget deficit to 3.1 percent of gross domestic product this year from 3.5 percent previously. This means limiting overspending by P290 billion this year, down from P314.4 billion in 2010. “In contrast to many governments around the world struggling to contain excessive budget deficits, the Aquino administration has kept its pledge to withdraw the fiscal stimulus injected in response to the global financial crisis,” the IIF said. “While there are no major tax initiatives in the current budget, the government expects to build on recent efforts to bolster administration and collection,” the group added. The IIF said further that given the weak revenue performance so far this year, the plan for total expenditures to grow by about 12 percent for 2011 as a whole “suggests that the government has room to bump up spending and meet its deficit-reduction target.” IIF also said that a further reduction in the deficit was likely to be forthcoming in the 2012 budget, which Malacanang is supposed to present to Congress in July. “Fiscal sustainability should be bolstered in 2013 when the government follows through with its intention to enhance the chronically deficient tax regime,” the group said. Latest data from the Bureau of the Treasury show that the government spent P26.258 billion less than planned in April, showing a budget surplus that is more than 10 times the P2.6 billion posted in the same month of 2010 and the highest in 25 years. Malacañang’s fiscal performance in April resulted in a surplus of P61 million for the first four months of 2011, a reversal of the P131.8-billion budget deficit recorded in the same period last year. |
U.S. Stocks Advance on Retail Sales Report, China’s Industrial Production U.S. stocks rallied and the Standard & Poor’s 500 Index advanced the most in almost two months after better-than-estimated data on American retail sales and Chinese industrial production. Home Depot Inc. (HD) advanced the most in the Dow Jones Industrial Average, gaining 4.5 percent. Best Buy Co., the world’s largest consumer electronics retailer, surged 4.6 percent after profit exceeded analysts’ forecasts on rising demand for smartphones. J.C. Penney Co. soared 17 after naming Ron Johnson, Apple Inc. (AAPL)’s retail head, as its chief executive officer. Energy shares rallied the most among 10 groups in the S&P 500 as oil rebounded from its lowest in a month. The S&P 500 rose 1.3 percent, the most since April 20, to 1,287.87 at 4 p.m. in New York. The Dow increased 123.14 points, or 1 percent, to 12,076.11. “The China numbers were fine and the retail sales report was pretty much in line,” said Liam Dalton, president of Axiom Capital Management Inc. in New York, which oversees $1.4 billion. “We got ourselves into a short-term oversold condition and the market wants to bounce back now. That’s indicative of the trading range we will be in for a while. There’s a change in tone in the data as it has been coming in slower, but on the other hand valuations are relatively low.”
The benchmark security tumbled the most since January on eased concern the economy is slowing as well as speculation this quarter’s rally in bonds may be hard to sustain. Bonds remained lower after Federal Reserve Chairman Ben S. Bernanke said the U.S. debt ceiling shouldn’t be used as a bargaining chip to force budget cuts. Global stocks gained. “Prices today have changed more than the facts,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford,Connecticut. “It’s less clear it’s a domestic data story than it is a technical test of the Treasury market and a rebound or a bit of a bounce in the equity market.” Yields on 10-year notes climbed 11 basis points, or 0.11 percentage point, to 3.10 percent at 5:14 p.m. in New York, according to BGCantor Market Data prices. The 3.125 percent securities due in May 2021 slid 31/32, or $9.69 per $1,000 face amount, to 100 7/32. |
Oil Trades Near Three-Day High on U.S. Retail Sales; Stockpiles Decline Oil traded near a three-day high in New York after reports showed U.S. retail sales fell less than expected and crude supplies slipped a second week, stoking speculation fuel demand may increase. Futures were little changed after climbing the most in almost four weeks yesterday. Purchases dropped 0.2 percent in May, less than the median forecast for a 0.5 percent decline in a Bloomberg News survey of economists, Commerce Department figures showed. The industry-funded American Petroleum Institute said crude stockpiles fell 3.01 million barrels last week. “The market rallied off the economic data,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We remain under pressure with the data being what it is.” Crude for July delivery was at $99.56 a barrel, up 19 cents, in electronic trading on the New York Mercantile Exchange at 9:04 a.m. Sydney time. The contract yesterday gained $2.07, or 2.1 percent, to $99.37 in the biggest percentage increase since May 18. Prices are 29 percent higher the past year. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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Jonathan Ravelas
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Rhys Cruz
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