MANILA, Philippines -- (UPDATE) The government posted a budget deficit of P9.4 billion in 2007, the lowest in 10 years and equivalent to just 15 percent of the programmed deficit for the year, as asset sales offset shortfalls in tax collections, data released on Monday showed.
The 2007 deficit accounted for 0.1 percent of the country's gross domestic product compared to the target of 0.9 percent of GDP or P63 billion.
For the month of December, the government incurred a deficit of P22 billion, a big jump from the deficit of P6.5 billion recorded a year before.
The December shortfall wiped out the P12.6-billion surplus recorded in the first 11 months of 2007.
Finance Secretary Margarito Teves, who had initially projected a budget surplus of P300 million for 2007, said the government is sticking to its goal of balancing the budget in 2008.
But achieving this goal will be a challenge, he said at a news briefing.
"While we completed 2007 on a budget position far better than the P63-billion deficit target, 2008 brings a new set of challenges," Teves said.
The main challenge is how to boost tax collection despite a slowing economy in the US, which happens to be the biggest market for Philippine exports.
"Our continuing priority is to see to it that we generate the resources necessary to support higher levels of investments in infrastructure and essential social services, and to mitigate any adverse effects of a weakening US economy," he said.
The government has been running a deficit since 1998 and the administration of President Gloria Arroyo aims to balance the budget in 2008, two years before her term expires.
Revenue in 2007 totaled P1.135 trillion, up 15.8 percent from the previous year. Expenditures totaled P1.144 trillion, 9.5 percent more than total spending in 2006.
Increased spending in infrastructure last year helped boost economic growth in the Southeast Asian nation to 7.3 percent, the highest in 31 years.
Taxes collected by the Bureau of Internal Revenue, the government's main revenue-generating agency, were 7.1 percent short of the target of P765.9 billion.
But revenue from other offices, including proceeds from asset sales, surged to P144.7 billion, more than double the target of P71.2 billion and 166 percent higher than the previous year's P54.3 billion.
The government's improved finances prompted Moody's Investors Service last month to upgrade the outlook on the country's key credit ratings and ceilings to positive from stable. The ratings agency commended the progress in Manila's efforts to stabilize public sector finances and to cut its dependence on external financing.
But Moody's said that for the ratings to move up, the government's commitment to fiscal consolidation must continue through stronger revenue effort or expenditure restraint, or a combination of both.
Moody's also wants to see more progress in government efforts to reform and restructure the power sector to keep public finances on firmer ground.
Philippine debt is rated several notches below investment grade by all major ratings agencies.
($1 = P40.74)