Budget gap shrinks in July

The National Government’s (NG) budget deficit sharply shrank in July as revenues posted double-digit growth, the Bureau of the Treasury (BTr) said.

Data from the BTr on Wednesday showed that the budget gap narrowed by 39.67% to PHP 28.85 billion in July from PHP 47.81 billion in the same month a year ago.

Month on month, it shrank by 86.2% from the PHP 209.08-billion deficit in June.

In July, revenues increased by 11.09% to PHP 457.37 billion from PHP 411.73 billion in the same month last year.

Broken down, tax revenues climbed by 15.46% to PHP 402.82 billion in July from PHP 348.88 billion in the same month in 2023. This made up 88% of total revenues, the BTr said.

The Bureau of Internal Revenue’s (BIR) collections increased by 17.09% to PHP 319.81 billion in July, which is net of a PHP 175-million tax refund.

Collections by the Bureau of Customs (BoC) went up by 9.99% to PHP 80.36 billion, net of a PHP 645-million tax refund, in July.

Tax revenues from other offices declined by 1.38% to PHP 2.65 billion in July.

Meanwhile, nontax revenues in July fell by 13.2% to PHP 54.55 billion from PHP 62.77 billion in the same month a year ago.

BTr said its income slumped by 60.82% to PHP 19.91 billion “primarily due to the BSP’s (Bangko Sentral ng Pilipinas) one-off remittance of PHP 31.9 billion last year, as well as reduced income from BTr-managed funds and NG deposits.”

Collections from other offices surged by 188.2% to PHP 34.6 billion in July.

Meanwhile, state spending rose by 5.8% to PHP 486.22 billion in July from PHP 459.54 billion a year ago “partly due to the higher National Tax Allotment (NTA) share of local government units (LGUs),” the BTr said.

Interest payments jumped by 24.99% to PHP 79.43 billion in July from PHP 63.55 billion a year prior.

“This was due to the higher cost of financing and depreciation of the peso observed throughout the year,” BTr said.

Data from the Bankers Association of the Philippines showed that the peso appreciated by 24.5 centavos to PHP 58.365 per dollar as of end-July from PHP 58.610 per dollar as of end-June.

Primary spending — which refers to total expenditures net of interest payments — went up by 2.73% year on year to PHP 406.8 billion in July.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the narrower deficit “may largely have to do with improvement in recurring tax revenue collections by the BIR with no more coronavirus pandemic restrictions for more than a year.”

The Finance department reported on Tuesday that the budget deficit widened by 7.21% to PHP 642.8 billion in the first seven months of the year as revenue growth outpaced expenditures.

The fiscal gap is expected to narrow in the coming months if the NG continues to see double-digit revenue growth, Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

“The better news is that the government has leeway to allot more for primary expenditures versus interest payments if the narrowing trend continues,” he said in a Viber message.

The Philippine and US central banks’ expected rate cuts should help narrow the budget shortfall, Mr. Ricafort said.

IMPROVEMENT

Meanwhile, the deficit-to-gross domestic product (GDP) ratio averaged 4.87% in the first six months of 2024 from 4.8% a year ago. This is still below the government’s deficit ceiling of PHP 1.48 trillion, equivalent to 5.6% of GDP.

Revenue effort improved to 17.06% as of end-June from 16.17% a year ago. This was above the government’s programmed 16.12% revenue-to-GDP ratio for 2024.

Revenue effort covers the share of tax revenues, nontax revenues, and other government revenues in relation to GDP.

Tax effort inched up to 14.57% in the first half from 14.5% a year prior. Tax effort refers to total tax revenue, including social security contributions, as a share of GDP.

Expenditure effort jumped to 21.94% as of end-June from 20.96% last year. It was higher than the 21.72% programmed spending-to-GDP ratio for the year.

Expenditure effort refers to the share of spending on public goods and services to GDP. — B.M.D.Cruz