Philippine budget deficit balloons in June

The National Government’s (NG) budget deficit ballooned to PHP 241.6 billion in June as state spending outpaced revenue collections, the Bureau of the Treasury (BTr) said on Thursday.

Data from the Treasury showed the Philippines’ budget deficit widened by 15.56% to PHP 241.6 billion in June from PHP 209.1 billion in the same month a year ago.

Month on month, the budget deficit widened by 66.46% from PHP 145.2 billion in May.

In June, state spending jumped by 8.49% to PHP 548.5 billion from PHP 505.6 billion in June 2024.

The BTr attributed the faster spending to higher National Tax Allotment shares of local government units, the annual block grant to the Bangsamoro Autonomous Region in Muslim Mindanao, personnel services, and interest payments.

Primary spending — which refers to total expenditures minus interest payments — grew by 9.14% to PHP 491.1 billion in June from PHP 450 billion a year earlier. This accounted for 89.53% of the total June disbursements.

Interest payments increased by 3.19% to PHP 57.4 billion in June this year from PHP 55.6 billion in the same month in 2024.

NG’s primary deficit stood at PHP 184.2 billion in June, up by 20.04% from PHP 153.4 billion in the same month last year.

Meanwhile, revenue collections went up by 3.5% to PHP 306.9 billion in June from PHP 296.5 billion in the same month last year.

“The sustained double-digit growth in tax collections offset the high base effect of the one-off remittances under nontax revenues last year,” the BTr said.

Tax revenues increased by 12.35% to PHP 280.1 billion in June from PHP 249.3 billion in the same month in 2024.

The bulk came from the Bureau of Internal Revenue (BIR), which collected PHP 200.5 billion in June, up by 16.24% from PHP 172.5 billion a year ago.

Collections by the Bureau of Customs (BoC) rose by 3.23% to PHP 77 billion, while other offices’ revenues rose by 16.71% to PHP 2.6 billion.

On the other hand, nontax revenue slumped by 43.25% year on year to PHP 26.8 billion in June “due to the high base effect of one-off remittances in 2024.”

The BTr’s revenues surged by 116.49% to P16.1 billion in June from PHP 7.4 billion a year ago, thanks to the NG’s bigger share in profits of the Philippine Amusement and Gaming Corp. as well as dividend remittance from the Power Sector Assets and Liabilities Management Corp.

Income from other offices also dropped by 73.04% to PHP 10.7 billion in June.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the budget deficit in June was the widest in three months since March.

“Budget deficits could increase the need for additional borrowings from a cash flow perspective,” he said.

First-half gap

In the first six months of the year, the NG budget deficit widened by 24.69% to PHP 765.5 billion from the PHP 613.9-billion gap last year.

The BTr said the budget deficit remained relatively within target as it was 0.63% above the programmed PHP 760.7 billion for the first half.

Revenue collection in the first half increased by 5.15% to PHP 2.26 trillion from PHP 2.15 trillion in the same period in 2024. This was 0.89% lower than the programmed PHP 2.28 trillion for the six-month period.

Tax revenues rose by 10.74% to PHP 2.03 trillion as of end-June, 1.3% below the PHP 2.06 trillion program.

BIR collections increased by 14.11% to PHP 1.55 trillion as of end-June, driven mainly by increases in corporate income tax, value-added tax, and personal income tax. However, this was 1.52% below the PHP 1.58-trillion program.

“Additional sources of higher revenue came from increased excise tax collections on tobacco, including electronic cigarettes, through the Bureau’s continued efforts to intensify the crackdown on the illicit tobacco trade and the strict implementation of the mandatory excise tax stamps on vapor products,” it said.

Higher percentage tax collections from banks and financial institutions also helped boost BIR revenues.

The BoC collection inched up by 0.71% to PHP 458.8 billion as of end-June, but 0.58% below the PHP 461.4-billion program.

Nontax revenues slumped by 27.53% to PHP 227.7 billion in the January-to-June period. It exceeded the PHP 221.4 billion program by 2.87% amid better-than-expected income of the BTr.

Treasury income slipped by 11.37% to PHP 145.3 billion in the first half, while other offices’ income fell by 45.14% to PHP 82.5 billion.

Meanwhile, state spending rose by 9.49% to PHP 3.03 trillion as of end-June, from P2.76 trillion a year ago. It was just 0.51% below the PHP 3.04-trillion disbursement program for the period.

Primary expenditures rose by 9.41% to PHP 2.61 trillion as of end-June, while interest payments increased by 9.97% to PHP 414.8 billion.

In the first half, the NG’s primary deficit widened by 48.16% to PHP 350.7 billion. It exceeded the first-half program of PHP 343.7 billion by 2.04%.

“Although interest payments grew, the bulk of the deficit growth can be attributed to higher expenses due to government projects and disbursement to local government units,” Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said.

“The budget deficit can still be managed as revenue collection is still strong and debt obligations are growing at a modest pace. As long as each expenditure results in better productivity then the deficit may still be manageable,” he said.

For this year, the NG’s deficit ceiling is capped at PHP 1.56 trillion or 5.5% of gross domestic product. — Aubrey Rose A. Inosante