Gov’t projecting budget gap in Jan-March to reach P112B MANILA, Philippines—Although it posted a budget surplus in January, the government expects to incur a deficit of P112 billion in the first quarter, as efforts to shore up revenue collection are not expected to take full effect until the latter part of the year. The Department of Finance has set the deficit ceiling for the period at P112 billion, according to this year’s fiscal program. This will result from the programmed expenditure of P431 billion and the expected revenue of only P319 billion for the first quarter. The first quarter is seen to register the lowest amount of revenues compared with the three other quarters. Revenues are likely to rise in the succeeding quarters given the efforts to go after tax cheats and the government’s resolve to strictly implement the country’s tax laws. Under the 2011 fiscal program, revenues in the second, third, and fourth quarters are seen to reach P367 billion, P354 billion and P370 billion, respectively. Expenditures are seen hitting P407 billion, P437 billion, P436 billion in the same periods, respectively. The budget gaps are seen to settle at P40 billion, 82 billion, and P66 billion in the second, third, and fourth quarters, much lower than the first-quarter figure. For the entire year, the deficit is seen to reach P300 billion, lower than the actual budget gap of P314 billion last year. The government had targeted to achieve a balanced budget position in 2008. However, it had to back-track given the global economic turmoil then. Finance officials said the global crisis forced the government to spend more on infrastructure and social services. Without the pump-priming initiatives, they said, the Philippines could have succumbed to recession in 2009. Now that the global crisis is over, the Aquino administration’s economic team said the government had started implementing a deficit-reduction plan. Under the plan, the deficit-to-GDP (gross domestic product) will be reduced to 3.2 percent this year and to less than 3 percent by the end of President Aquino’s term. Last year, the deficit-to-GDP ratio stood at 3.7 percent. The unfavorable fiscal situation has been cited by credit-rating agencies as one of the reasons why the country’s credit scores remained below investment grade. They said the country’s outstanding debt, estimated at P4.7 trillion, is higher compared with those of similarly rated economies. The rising debt level was blamed on the yearly deficits incurred by the government. |
S&P 500 Erases Advance for Year as Japanese Nuclear Concern Intensifies U.S. stocks retreated, sending the Standard & Poor’s 500 Index to the lowest level since December, amid concern that Japan’s nuclear crisis will worsen. The iShares MSCI Japan Index Fund (EWJ) tracking 323 securities slumped 3.7 percent. KB Home and D.R. Horton Inc. slid more than 2.2 percent, pacing declines in homebuilders, as housing starts plunged to the lowest level in almost a year. International Business Machines Corp. (IBM) fell 3.8 percent as Sanford C. Bernstein & Co. cut its rating on the shares. Apple Inc. (AAPL) sank 4.5 percent after JMP Securities LLC downgraded the maker of iPads. The S&P 500 fell 2 percent to 1,256.88 at 4 p.m. in New York. The Dow Jones Industrial Average slid 242.12 points, or 2 percent, to 11,613.30, the biggest drop since August. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 21 percent to 29.40, the highest level since July. “The risks have risen and you have to be mindful of them,” said David Joy, chief market strategist at Columbia Management in Boston, which oversees $350 billion. “It’s difficult to nail down what’s accurate information coming out of Japan and what isn’t. There’s concern that the problems at the nuclear plants are far more serious than the problems associated with the earthquake. In addition to that, there’s ongoing housing weakness in the U.S. and a fear premium built into the oil market. That’s why you have to hedge your bets.”
The Federal Reserve delayed buying Treasuries after as a plunge in yields at the time of the schedule close of the transaction added to volatility. The Standard & Poor’s 500 Index erased its gain for the year and the yen strengthened to a post- World War II high versus the dollar as the rising risk of radiation leaks boosted speculation Japanese investors sell overseas assets to finance repairs. “It’s a classic flight to quality trade,” said Alex Li, an interest-rate strategist in New York at Deutsche Bank AG, one of the 20 primary dealers who trade with the Fed. “There’s lot of uncertainty as to what’s happening with the nuclear situation. When people don’t feel comfortable in other asset classes, they move into Treasuries.” Yields on 10-year notes fell 13 basis points, or 0.13 percentage point, to 3.17 percent at 5:36 p.m. in New York, according to BGCantor Market Data. It dropped as low as 3.14 percent, the least since Dec. 8. Two-year note yields fell 6 basis points to 0.544 percent. Treasury 10-year note yields fell to a record low of 2.04 percent on Dec. 18, 2008, as investors sought safety in U.S. debt as global credit markets froze and the U.S. economy lapsed into recession. |
Oil Pares Increase as Japan Nuclear Crisis Outweighs Unrest in Middle East Crude pared gains as concern over Japan’s nuclear crisis overshadowed fighting in the oil-rich regions of the Middle East and Northern Africa. Futures retreated more than $1 after EU Energy Commissioner Guenther Oettinger told a European Parliament committee that Japan’s Fukushima Dai-Ichi power plant “is effectively out of control.” Oil rose as much as 2.5 percent earlier as escalating violence in Bahrain increased concern that unrest will spill into Saudi Arabia, the world’s biggest crude-exporting country. “It was a blow to the market to hear the situation in Japan described as ‘out of control’ by such a senior and important person,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’re looking for anything that gives us a signal of how strong Japanese energy demand will be.” Crude oil for April delivery rose 80 cents, or 0.8 percent, to settle at $97.98 a barrel on the New York Mercantile Exchange. Futures were up as much as $2.42 to $99.60 before the commissioner spoke. Oil is 20 percent higher than a year ago. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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