Budget gap exceeds full-year ceiling

The national government’s  (NG) budget deficit narrowed year on year in 2024, but overshot the target by 1.48%, the Bureau of the Treasury (BTr) said.

Data from the Treasury released on Thursday showed that the budget deficit shrank by 0.38% or PHP 5.7 billion to PHP 1.506 trillion in 2024 from PHP 1.512 trillion in 2023.

However, it exceeded the PHP 1.48-trillion deficit ceiling set by the Development Budget Coordination Committee.

“The slight variance versus the PHP 1.484-trillion deficit program was primarily due to a higher outturn in government spending including those charged to unprogrammed appropriation, as well as defrayment of accounts payables,” the Treasury said.

As of end-2024, the deficit as a share of gross domestic product (GDP) settled at 5.7%, lower than 6.2% at end-2023 but slightly higher than the target of 5.6%.

BTr data showed revenue collection jumped by 15.56% to PHP 4.42 trillion and exceeded its PHP 4.27-trillion target due to better-than-expected non-tax revenue collections.

“This is equivalent to 16.72% of GDP, the highest revenue effort in the last 27 years, since 1997,” the Treasury said.

Tax revenues rose by an annual 10.83% to PHP 3.8 trillion in 2024 but fell short of the PHP 3.82-trillion target by 0.51%.

Collections by the Bureau of the Internal Revenue (BIR) increased by 13.29% year on year to PHP 2.852 trillion, driven by increased value-added tax (VAT) collections. It surpassed the PHP 2.849-trillion target by 0.09%.

On the other hand, the Bureau of Customs’ (BoC) revenues went up by 3.79% to PHP 916.7 billion in 2024 but fell short of the PHP 939.7-billion target by 2.45%

The BTr attributed the lower Customs collections to the reduced tariff on rice and selected electric vehicles, as well as the extension of lower tariffs on meat products.

“The increase is attributable to the growth across duties, VAT, and excise collections, which is among the effects of the bureau’s strengthened digitization, inspection, and border protection efforts implemented during the year,” the BTr said.

Meanwhile, nontax revenues surged by 56.61% to PHP 618.3 billion in 2024, exceeding the full-year target PHP 449.6 billion by 37.53%.

“The better-than-expected outturn was primarily due to strengthened efforts to generate windfall collections such as that from the Public-Private Partnership (PPP) concession fee (PHP 30 billion) and the PHP 167.2-billion fund balance transfers from the Philippine Health Insurance Corp. (PHIC) and Philippine Deposit Insurance Corp. (PDIC),” the Treasury said.

“Deducting the fund balance transfers, total nontax collections of PHP 451.1 billion still exceeded the adjusted full-year program by 0.33% (PHP 1.5 billion).”

The Treasury’s income grew by 24.48% to PHP 283.4 billion last year and surpassed the PHP 187-billion target by 51.52%. This was due to “higher dividend remittances, interest advances from government-owned and -controlled corporations, guarantee fees, and NG share from the Philippine Amusement and Gaming Corp. profits.”

Revenue from other offices more than doubled to PHP 335 billion from PHP 167.2 billion in 2023. It also exceeded its PHP 262.6-billion program by 27.56%.

At the same time, government expenditures rose by an annual 11.04% to PHP 5.925 trillion in 2024. This was 2.97% higher than its PHP 5.754-trillion annual program.

“The strong disbursement performance was largely driven by infrastructure and other capital outlays of the Department of Public Works and Highways (DPWH),” the BTr said.

It also cited the “maintenance and other operating expenses for various health and social protection programs, and personnel services expenditures due to the implementation of the first tranche of salary adjustments of qualified civilian government employees.”

Primary spending — which refers to total expenditures minus interest payments — increased by 9.65% to PHP 5.16 trillion last year. It was 3.43% higher than the programmed PHP 4.999 trillion.

Interest payments (IP) jumped by 21.48% to PHP 763.3 billion due to the “higher interest rates and less favorable foreign exchange rate conditions.” However, it was 0.02% lower than the revised program of PHP 763.4 billion.

December deficit

In December alone, the NG’s budget deficit also sharply narrowed by 17.82% to PHP 329.5 billion from PHP 401 billion in the same month in 2023.

Revenue collection rose by 20.99% to PHP 314.7 billion in December, as tax revenues inched up by 2.01% to PHP 251.6 billion.

Broken down, BIR collection went up by 5.48% to PHP 183.8 billion, while Customs collection slipped by 6.38% to PHP 66.7 billion.

Meanwhile, nontax revenues surged by 369% to PHP 63.1 billion, as Treasury revenues climbed by 348% to PHP 50.7 billion.

On the other hand, government spending fell by 2.55% to PHP 644.2 billion in December.

Primary spending slid by 2.36% to P586.2 billion while interest payments dropped by 4.45% to PHP 58 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slightly lower deficit in 2024 largely reflected higher government expenditures.

“Higher prices and election-related spending could have partly led to the increase in government expenditures in 2024,” he said.

Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message that the fiscal performance “demonstrates a delicate balancing act between revenue mobilization and expenditure management amid macroeconomic headwinds.”

“While the deficit narrowed slightly to P1.506 trillion, the achievement is noteworthy given the substantial 21.48% surge in interest payments that created significant expenditure pressure,” he said.

“The narrowing deficit trajectory, despite missing the precise target, still represents significant fiscal consolidation progress, with the deficit-to-GDP ratio improving from 6.2% to 5.7%, continuing the favorable trend since the post-pandemic high of 8.6% in 2021,” Mr. Roces added. — A.R.A. Inosante