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Guarded optimism after deficit cut slips


Jose Camacho

News that the Philippines had exceeded its first-half budget deficit target of Ps78.26 billion ($1.55 billion) by 53% brought many optimistic investors back to reality.

At Ps119.74 billion, the first-half budget deficit is equal to 92% of the full-year target.

The shortfall casts doubt on an ambitious target of cutting the 2002 deficit to Ps130 billion (3.5% of GDP), down from 2001's record Ps147 billion (4.6% of GDP). The deficit target is seen as crucial to reducing a debt to GDP ratio of roughly 80% and also in justifying the much touted economic credibility of Gloria Macapagal Arroyo's administration.

Why the target was missed

Analysts point out that the government front-loaded its international debt issuance and spending after having held back in the second half of 2001 to come within an inch of its target for the year.

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