The national government fiscal deficit from January to April 2009 has reached an alarming P111.8 billion level, suggesting that the country may be on the brink of a renewed fiscal crisis, according to research group Ibon Foundation. If the country's experience after 2002 is to serve as a guide, this could mean soaring debt payment, depressed spending on social services and eventually higher taxes, Ibon said. Sonny Africa, Ibon research head, said the four-month deficit is more than four times the budget deficit of P25.8 billion during the same period last year. It is also more than half the latest full-year target of P199.2 billion and already far above the earlier targets of just P40 billion announced in October 2008 and of P101.3 billion in January 2009. Africa said a deficit of this size so early in the year is alarming, especially because the impact of the global crisis has yet to fully play out in the domestic economy, including on revenue collections. As it is, the deficit trend is alarmingly similar to that in 2002 when it reached a record P210.7 billion which was equivalent to 5.4 percent of GDP. The first quarter deficit of P61.2 billion in 2002 was equivalent to 6.8 percent of GDP while the first quarter 2009 deficit of P119.7 billion is ominously similar at 6.9 percent of GDP. The record fiscal deficit in 2002 ushered in a long period of soaring debt service and declining spending on social services which culminated in the imposition of the repressive revised value-added tax (RVAT) in November 2005. Interest and principal payments on debt totaled P2,963 billion in 2002-2006, and by 2006 were taking up nearly P0.90 of every P1 in revenues collected. These payments were made at the expense of social services and the five-year period saw the share of education in the national budget falling from 16.9 percent to 13.8 percent and that of health from 2 percent to 1.5 percent. The fiscal crisis that started in 2002 was used to justify the imposition of new taxes through RVAT in 2005. The new RVAT law increased the tax burden on Filipinos by some P290 billion over the years 2006-2008. Revenue collection fell in absolute terms in 2009 compared to the year before. Total revenues of P352 billion in the first four months of 2009 was 6.3 percent down from the same period last year. Part of the reasons for this is the drastically slowing economic growth amid the global turmoil and a moderation of global oil prices, Ibon said. The fall in revenues could be even worse in the coming months because peak oil prices last year were not even in the January to April period but in the months from May to August, the group said. As it is, the government's tax collection has barely kept pace with nominal growth in gross national product (GNP) and has at times even lagged behind. Revenue increases in the 2006-2008 period have been largely due to the new RVAT law (P290 billion, including the effects of the global oil price hikes) and unprecedented but one-shot privatization (P128 billion). If these are factored out of revenues, the government's revenues measured as a percentage of GNP, declines to around 14 percent in 2008 or the lowest in over two decades, Ibon said. “If revenue performance for the rest of the year remains the same as in the January to April period, the national government could face a deficit of some P287.3 billion by the end of the 2009,” Ibon aid.
