NG budget deficit exceeds full-year ceiling in 2023

The National Government’s (NG) budget gap narrowed in 2023, but exceeded the ceiling as both revenues and expenditures surpassed the programs, the Bureau of the Treasury (BTr) said.

Data from the BTr released on Thursday showed that the budget deficit narrowed by 6.32% to PHP 1.51 trillion in 2023 from PHP 1.61 trillion in the previous year.

However, it exceeded the PHP 1.499-trillion ceiling set by the Development Budget Coordination Committee (DBCC) by 0.85%.

As of end-2023, the deficit as a share of gross domestic product (GDP) settled at -6.2%, a tad higher than the -6.1% target set by the government but lower than the -7.3% deficit-to-GDP ratio at end-2022.

Revenues jumped by 7.86% to PHP 3.82 trillion in 2023 from PHP 3.55 trillion in the prior year. This was 2.55% higher than its PHP 3.73-trillion annual program.

The BTr said it surpassed the revenue program due to the “overperformance of nontax collections.”

Tax revenues rose by an annual 6.49% to PHP 3.43 trillion, but 3.07% lower than its PHP 3.54-trillion program.

Collections by the Bureau of the Internal Revenue (BIR) increased by 7.76% year on year to PHP 2.52 trillion, but fell short of its PHP 2.64-trillion target primarily due to the change in schedule of value-added tax (VAT) return filings.

Bureau of Customs (BoC) revenues went up by 2.41% to PHP 883.2 billion in 2023, surpassing its PHP 874.2-billion full-year target by 1.04%.

“BoC’s strong performance may be attributed to its enhanced revenue collection efforts, intensified anti-smuggling measures as well as digitalization projects for trade facilitation,” the Treasury added.

Meanwhile, nontax revenues jumped by 21.41% to PHP 394.8 billion in 2023, more than double its PHP 191.1-billion program.

BTr income climbed by 47.09% to PHP 227.6 billion last year, quadrupling its PHP 58.3-billion target.

“Similarly, the Bureau outperformed the 2023 program on account of higher remittances of dividends from government-owned and -controlled corporations (GOCC), income from investments, and interest on NG deposits, as well as NG share in PAGCOR (Philippine Amusement and Gaming Corp.) profit,” it added.

Revenue from other offices slipped by 1.91% to PHP 167.2 billion but surpassed its PHP 132.8-billion program by 25.92%.

On the other hand, government expenditures inched up by 3.42% to PHP 5.34 trillion last year, and exceeded by 2.06% its PHP 5.23-trillion program.

“The lower National Tax Allotment shares of Local Government Units for 2023 weighed down on the overall growth of spending,” the BTr said.

“Nonetheless, other productive expenditures, particularly infrastructure and other capital outlays, as well as personnel services expenses, helped buoy government disbursements in 2023,” it added.

Primary spending — which refers to total expenditures minus interest payments — edged up by 1.1% to PHP 4.71 trillion last year.

Interest payments jumped by 24.95% to P628.3 billion due to the “tightening of global funding conditions and the impact of higher borrowing to provide stimulus during the pandemic.”

In December alone, the NG’s budget deficit widened by 5.97% to PHP 401 billion from PHP 378.4 billion in the same month in 2022.

Revenue collection during the month declined by 3.03% to PHP 260.1 billion, as tax revenues slipped by 2.86% to PHP 246.6 billion.

BIR revenues dropped by 2.79% to PHP 174.3 billion, while Customs collection went down by 2.68% to PHP 71.2 billion.

Meanwhile, nontax revenues decreased by 5.96% to PHP 13.5 billion in December. BTr income jumped by 72.67% to PHP 11.3 billion while revenue from other offices fell by 72.48% to PHP 2.1 billion.

During the month, government spending rose by 2.24% to PHP 661 billion from PHP 646.6 billion in December 2022.

Primary spending slipped by 0.43% to PHP 600.4 billion while interest payments climbed by 39.15% to PHP 60.7 billion.

FISCAL INDICATORS

Meanwhile, the BTr said that the revenue effort, or the measure of the government’s efficiency in raising revenue, stood at 15.7% of GDP at the end of the year. This was lower than the 16.1% recorded in 2022 but higher than the 15.2% target.

Tax effort, which refers to the revenue collected in the form of tax, stood at 14.1% of GDP as of end-2023. This dropped from 14.6% in the previous year and was below the 14.4% target.

“Meanwhile, total expenditure was at 22% of GDP, surpassing the 21.3% implicit target but lower than the 23.4% attainment in 2022, consistent with fiscal consolidation,” the BTr said.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said that the NG managed to narrow its budget gap due to its focus on debt management and fiscal consolidation.

“There were bright spots and we have seen the rise of revenue collections. Nonetheless, amid the high interest rates, the government had to be more focused on making sure the budget is well managed and obligations are properly met,” he said in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the government expenditures were also bloated by higher prices and inflation.

The Bangko Sentral ng Pilipinas’ (BSP) benchmark rate stood at 6.5% at end-2023, the highest in nearly 17 years.

From May 2022 to October 2023, the central bank hiked borrowing costs by 450-basis points to combat inflation.

“Nevertheless, the narrower budget deficit fundamentally reflected the faster growth in government revenues for 2023 as the economy recovered further and amid efforts to intensify tax collections,” Mr. Ricafort added.

The government is aiming to further reduce its deficit-to-GDP ratio to 3% by 2028. – Luisa Maria Jacinta C. Jocson, Reporter