Budget surplus narrows in April as spending rises

The National Government’s (NG) budget surplus narrowed in April as expenditures surged by 32%, outpacing the 22% rise in revenues, the Bureau of the Treasury said.

Data from the BTr showed that the NG’s budget surplus shrank by 36.03% to PHP 42.7 billion in April from the PHP 66.8-billion surplus posted in the same month a year ago.

Month on month, the budget balance swung to a surplus from the PHP 195.9-billion deficit in March.

State expenditures surged by 32.25% to PHP 494.5 billion in April from PHP 373.9 billion in the same month in 2023.

“The expansion was driven by higher releases of the National Tax Allotment (NTA) and subsidies to government- owned and -controlled corporations (GOCCs), including releases to Power Sector Assets and Liabilities Management Corp. (PSALM)… as well as the release of the 4^th tranche of capitalization of the Coconut Farmers Industry Trust Fund,” the BTr said in a statement.

Broken down, interest payments climbed by 45.93% to P67.5 billion in April from PHP 46.3 billion in the same month in 2023.

“The increase was attributed to the timing of payments for domestic securities and the impact of foreign exchange fluctuations on foreign borrowings,” the BTr said.

Primary spending, which refers to total expenditures minus interest payments, jumped by 30.32% to PHP 427 billion in April from PHP 327.6 billion a year ago.

Meanwhile, government revenues jumped by 21.9% to PHP 537.2 billion in April from PHP 440.7 billion in the same month a year ago.

“The increase in tax revenues was fueled by double-digit growth in the collections of revenue collecting agencies while the increase in nontax revenues was due to strong dividend remittance,” the BTr said.

BTr data showed that tax revenues increased by 13.9% to P461.8 billion in April from P405.4 billion a year earlier.

The Bureau of Internal Revenue (BIR) collections went up by 12.65% to P378.5 billion, due to an “overperformance in all major tax types compared to the same period in 2023.”

“Both income tax and value-added tax (VAT) posted double-digit growth as annual income tax filing and first-quarter 2024 VAT payments are due during the said month,” it added.

The Bureau of Customs’ (BoC) revenues rose by 19.52% to P80.7 billion in April.

Meanwhile, nontax revenues more than doubled to P75.4 billion during the month from P35.3 billion in April 2023.

Income generated by the BTr soared by 250% to P64 billion in April. This as the Finance department raised the mandatory dividend remittances of GOCCs to the National Government to 75% of their annual net earnings in 2023 from 50% previously.

Nontax revenues from other offices declined by 32.89% to P11.4 billion from P17 billion last year due to the “one-off remittance of disposition proceeds from the Bases Conversion and Development Authority (BCDA) last year.”

Security Bank Corp. Chief Economist Robert Dan J. Roces said the budget surplus narrowed in April due to the “significant acceleration in public expenditures.”

“This suggests that the government has been actively investing in various programs and projects, which provides upsides to the gross domestic product (GDP) in 2024; it is expected that government spending will further pick up in the second quarter and beyond,” he said in a Viber message.

Mr. Roces said the pace and magnitude of state spending will depend on “the government’s priorities, the absorption capacity of implementing agencies, and the overall fiscal space.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the surplus was expected since the deadline for the filing of annual income tax returns was on April 15.

“However, the budget surplus is smaller than a year ago due to faster year on year in government expenditures partly due to higher inflation, higher interest rates and weaker peso exchange rate that increased the government’s debt servicing costs,” he added.

Headline inflation quickened for a third straight month to 3.8% in April from 3.7% in March.

The BSP kept its benchmark rate at a 17-year high of 6.5% for a fifth straight meeting in May.

FOUR-MONTH DEFICIT WIDENS
In the first four months of the year, the NG’s fiscal deficit widened to PHP 229.9 billion from the PHP 204.1-billion gap a year ago, as revenue and spending grew nearly at the same pace.

Revenues jumped by 16.8% to PHP 1.47 trillion in the January-to-April period from PHP 1.26 trillion a year ago.

Tax revenues increased by 13.21% to PHP 1.28 trillion, as BIR revenues rose by 15.35% to PHP 970.3 billion. BoC collections went up by 6.47% to PHP 299.6 billion.

Nontax revenues surged by 48.8% to PHP 188.8 billion during the period from PHP 126.9 billion a year ago.

BTr income more than doubled to PHP 136.3 billion due to “higher income from interest on advances and the NG’s share from the Philippine Amusement and Gaming Corp. profit which added to the intensified dividend remittance.”

Income from other offices fell by 24.56% to PHP 52.5 billion in the four-month period “mainly due to one-off remittances of the balance from the Department of Social Welfare and Development’s unconditional cash transfer program and BCDA.”

Meanwhile, state spending rose by 16.22% to PHP 1.7 trillion from PHP 1.46 trillion in the same period in 2023.

Interest payments surged by 38.39% to PHP 260.5 billion while primary spending increased by 12.95% to PHP 1.44 trillion.

“The increase in the year-to-date budget deficit… is a result of the government’s expansionary fiscal policy and consolidation efforts aimed at supporting the economy,” Mr. Roces said.

“While the deficit has widened, the NG will seek to strike a balance between providing necessary stimulus and maintaining fiscal sustainability in the medium to long term,” he added.

BTr data also showed that the NG’s revenue effort ratio stood at 15.28% in the first quarter. This was better than the 14.58% in the same period a year ago.

The government’s tax effort ratio rose to 13.43% in the first three months, slightly higher than the 12.95% in 2023.

Expenditure effort improved to 19.74% as of end-March from 19.4% a year earlier.

Separate data from the Treasury showed that the deficit-to-GDP ratio stood at 4.46% at the end of March. This was lower than the 4.82% as of March 2023 and 6.2% at the end of 2023.

The NG’s budget deficit is capped at 5.6% of GDP this year, equivalent to PHP 1.48 trillion. — By Luisa Maria Jacinta C. Jocson, Reporter