Budget deficit shrinks 45% in July

THE NATIONAL Government’s (NG) budget deficit shrank by 44.89% in July, amid double-digit growth in revenues and expenditures, the Bureau of the Treasury (BTr) said.

Data from the BTr showed the fiscal gap narrowed by 44.89% to PHP 47.8 billion in July from P86.8 billion in the same month a year ago.

“The NG’s budget deficit for July declined from a year ago on the back of 33.4% higher growth in revenue collection versus the 16.22% increase in government expenditures,” the BTr said.

In July, revenue collection rose to PHP 411.7 billion from P308.6 billion in the same month a year ago.

Tax revenues increased by 23.18% to PHP 348.5 billion in July, despite a double-digit decline in Customs collection.

The Bureau of Customs’ (BoC) collection declined by 12.61% year on year to PHP 73.1 billion, but this was offset by the 38.37% increase in Bureau of Internal Revenue (BIR) collection to PHP 273.1 billion.

Nontax revenues more than doubled to PHP 63.2 billion in July from PHP 25.7 billion in the same month a year ago. This was mainly due to the surge in BTr revenues to PHP 50.8 billion in July from PHP 13.4 billion a year ago. Revenues from other offices inched up by 0.58% to PHP 12.4 billion.

Meanwhile, state spending went up by 16.22% to PHP 459.5 billion during the month from PHP 395.4 billion a year ago.

The BTr said the increase in expenditures was mainly due to higher disbursements by the Social Welfare, Health and Agriculture departments.

“Spending in July also expanded on the back of significant infrastructure outlays of the Department of Public Works and Highways for its road network development program and the Department of Transportation for rail transport projects,” it added.

Primary expenditures, which refer to spending net of interest payments, rose by 15.35% to PHP 396 billion in July.

Interest payments jumped by 22% to PHP 63.6 billion during the month.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said that July was a “strong month” for both revenues and spending.

“This resulted in a narrower budget which would improve overall fiscal metrics. We’ll need to see more of this in the coming months with healthy spending complemented by a sustained increase in revenue collections,” he said in a Viber message.

China Banking Corp. Chief Economist Domini S. Velasquez said the “better-than-expected” deficit was mainly due to the increase in revenues that were likely helped by improvements in tax administration.

“Spending also greatly improved, which grew by 16.2% as the government ramps up spending,” she said.

The Philippine economy grew by a weaker-than-expected 4.3% in the second quarter, partly due to the 7.1% decline in government spending. Government agencies were flagged for their low budget utilization and slow spending in the first half.

“Given the red flag from government underspending in the second quarter, we expect this uptick in spending to continue. Revenues will likely taper off due to a slowdown in economic activities. Overall, we still expect the National Government to reach its target this year,” Ms. Velasquez added.

YEAR-TO-DATE DEFICIT

For the first seven months of the year, the budget gap narrowed by 21.22% to PHP 599.5 billion from the PHP 761-billion shortfall a year ago.

Government revenues in the January-July period rose by 11.58% to PHP 2.271 trillion from PHP 2.036 trillion a year ago.

Tax revenues, which accounted for 88.74% of the total revenues, grew by 10.52% to PHP 2.016 trillion from PHP 1.824 trillion in the previous year.

BIR collection increased by 12.21% to PHP 1.492 trillion, while BoC collection went up by 5.45% to PHP 506.5 billion.

Nontax revenues jumped by 20.72% to PHP 255.8 billion, as the BTr’s income climbed by 22.4% to PHP 143.8 billion.

“The BTr’s collection for the seven-month period (is) higher than the 2022 comparable performance and has already exceeded the full-year target of PHP 58.3 billion largely due to higher dividend remittances, income from managed funds and government deposits, as well as NG share from PAGCOR (Philippine Amusement and Gaming Corp.) profit,” it added.

Nontax revenues from other offices rose by 18.63% to PHP 112 billion, partly due to one-time remittances from Philippine Charity Sweepstakes Office, Department of Foreign Affairs, and Bases Conversion and Development Authority.

Meanwhile, government expenditures inched up by 2.66% to PHP 2.871 trillion in the January-to-July period from PHP 2.797 trillion a year ago.

Primary spending rose by 1.51% to PHP 2.525 trillion, while interest payments increased by 11.87% to PHP 346 billion year on year.

“January-July interest payments comprised 12.05% of the total expenditure, higher than last year’s 11.06%. Meanwhile, interest payments as a percentage of total revenues inched up to 15.23% from 15.19% in 2022,” the BTr said.

This year, the government has set a budget deficit ceiling of PHP 1.499 trillion, equivalent to 6.1% of the gross domestic product (GDP).

As of end-June, the NG’s deficit-to-GDP ratio stood at 4.8%, lower than the 6.5% ratio in the same period in 2022.

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