Wider deficit sans higher credit cost floated

Ramping up the target budget deficit past 3.2 percent of local output or the gross domestic product (GDP) this year should not hurt the country’s standing as sovereign borrower.

Finance Undersecretary and chief economist Gil Beltran of the Department of Finance (DoF) stressed this point at the sidelines of the Development Budget Coordination Committee (DBCC) budget briefing on Thursday.

Also, this outlook builds on the possible impact of a global recession and weakening global growth and demand that Beltran said should not affect the Philippines much.

According to him, the Philippines posted a deficit equal to 5 percent of GDP in the recent past and this did not endanger the country’s credit standing.

“During a crisis, they (the sovereign credit watchers) allow 5 percent,” Beltran said who argued that in 2008 when the Philippines posted a higher-than-target deficit the sovereign was not punished by higher credit costs.

He also ruled out a period of widespread economic decline or recession in the Philippines no matter that economies around the world are slowing. Except at the time of excesses when then President Marcos was at the helm, the Philippines has not had a recession since then, Beltran said.

According to him, external shocks brought about by the ongoing trade dispute between the US and China should not affect the Philippines too much given its reliance on domestic growth triggers.