Budget deficit shrinks to PHP 18.9B in July

The national government’s (NG) budget deficit sharply narrowed in July amid the sluggish pace of revenue collection and spending, the Bureau of the Treasury (BTr) said on Thursday.

Data from the BTr showed that the budget gap shrank by 34.42% to PHP 18.9 billion in July from PHP 28.8 billion in the same month a year ago.

Month on month, the fiscal gap plunged by 92.17% from the PHP 241.6-billion deficit in June.

In July, revenues went up by 3.26% to PHP 472.3 billion from PHP 457.4 billion in the same month last year, as higher tax collections offset the decline in nontax revenues.

Tax revenues, which made up the bulk of revenue collections, jumped by 5.01% to PHP 423 billion in July from PHP 402.8 billion in the same month in 2024.

Collections by the Bureau of Internal Revenue (BIR) rose by 4.83% to PHP 335.3 billion in July from PHP 319.8 billion a year ago. This included a PHP 3.8-billion tax refund.

“The BIR sustained its strong performance due to higher revenues from corporate income tax. This was followed by personal income tax, tax on government securities, excise tax on tobacco products, percentage tax on banks and fi-nancial institutions, and documentary stamp tax,” the BTr said.

Collections by the Bureau of Customs (BoC) increased by 6% to PHP 85.2 billion, net of a PHP 256-million tax refund, while other offices’ revenues fell by 3.47% to PHP 2.6 billion.

The BTr attributed the higher Customs revenue to the 12.69% year on year increase in excise tax collections, as well as the 6.13% rise in value-added tax collections.

On the other hand, nontax revenues slid by 9.66% to PHP 49.3 billion in July from PHP 54.6 billion in the same month in 2024, mainly due to the 62.6% plunge in collections by other offices to PHP 13 billion.

However, this was offset by the 82.42% surge in Treasury income to PHP 36.3 billion in July from PHP 19.9 billion a year ago. This was attributed to strong dividend remittances, interest income on NG deposits, and NG share from Manila International Airport Authority’s profits.

Meanwhile, government spending inched up by 1.02% to PHP 491.2 billion in July from PHP 486.2 billion in the same month in 2024.

The BTr said the increase was driven by higher National Tax Allotment releases to local government units, the Annual Block Grant to the Bangsamoro Autonomous Region in Muslim Mindanao, interest payments and personnel services expenditures.

“Spending in July was weighed down by the timing of big-ticket disbursements of the Department of Public Works and Highways, Department of Social Welfare and Development, and Department of National Defense for their respective banner programs,” it said.

Primary expenditure (net of interest payment) fell by 5.36% to PHP 385 billion in July, while interest payments went up by 33.72% to PHP 106.2 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the narrower fiscal deficit in July to a deceleration in overall government spending.

“The narrower budget deficit sends a positive signal for fiscal and debt management,” he said in a Viber message.

7-month deficit

In the first seven months of the year, the NG budget deficit ballooned by 22.04% to PHP 784.4 billion from the PHP 642.8-billion gap last year, as expenditure growth outpaced revenues.

The BTr said the budget deficit was on track to hit the revised PHP 1.56-trillion full-year deficit ceiling.

“This performance underscores the government’s commitment to support economic development while keeping within the bounds of prudent fiscal management,” it said.

State spending rose by 8.22% to PHP 3.52 trillion in the January-to-July period. This was already 57.82% of the P6.08-trillion revised full-year expenditure program.

Primary expenditures rose by 7.26% to PHP 2.99 trillion as of end-July, while interest payments went up by 14.1% to PHP 521 billion.

On the other hand, total revenue collection during the January-to-July period increased by 4.82% to PHP 2.73 trillion from PHP 2.61 trillion in the same period last year. The BTr said the cumulative collection was 60.45% of the PHP 4.52-trillion revised full-year program.

Tax revenues rose by 9.71% to PHP 2.46 trillion as of end-July, which was already 58.27% of the PHP 4.21-trillion target.

BIR collections stood at PHP 1.89 trillion, up 12.34% as of end-July, driven mainly by increases in corporate income tax, value-added tax, and personal income tax. This was 58.68% of the BIR’s PHP 3.22-trillion full-year target.

Customs collection inched up by 1.51% to PHP 544 billion as of end-July. This was 56.74% of the revised PHP 958.7-billion program for the year.

Nontax revenues plunged by 24.88% to PHP 277 billion for the first seven months of the year, largely due to the base effect of non-recurring large dividend remittances in 2024. It accounted for 91.87% of the PHP 301.5 billion-full-year nontax revenue program.

Treasury income dipped by 1.21% to PHP 181.6 billion as of end-July, while other offices’ income slumped by 48.41% to PHP 95.4 billion.

Mr. Ricafort said the narrower budget deficit reduces the urgency for more borrowings, implementing new taxes and raising tax rates.

The NG deficit ceiling is set at PHP 1.56 trillion this year, equivalent to 5.5% of gross domestic product (GDP). This is projected to decline to PHP 1.55 trillion, or 4.3% of GDP, by 2028. — Aubrey Rose A. Inosante, Reporter