NG budget deficit narrows in June

The national government’s (NG) budget deficit narrowed by 7.24% year on year in June, as revenue collection grew at a faster clip than spending, the Bureau of the Treasury (BTr) said on Wednesday.

Treasury data showed the budget gap shrank to PHP 209.1 billion in June from PHP 225.4 billion a year ago.

Month on month, the budget deficit widened by 19.54% from PHP 174.9 billion in May.

In June alone, revenue collections jumped by 10.93% to PHP 296.5 billion from PHP 267.3 billion in the same month last year.

Tax revenues rose by 3.37% to PHP 249.3 billion in June, mainly driven by the 4.71% increase in collections by the Bureau of Internal Revenue (BIR) to PHP 172.5 billion, net of a PHP 4.3-billion tax refund.

Collections by the Bureau of Customs (BoC) inched up by 0.67% to PHP 74.6 billion, while those by other offices fell by 5.54% to PHP 2.2 billion.

Nontax revenues surged by 80.6% to PHP 47.2 billion in June, driven by the 158.57% jump in revenues by other offices to PHP 39.8 billion. Revenues by the Treasury declined by 31% to PHP 7.4 billion in June, “due to lower dividend remittance and income from BTr-managed funds.”

On the other hand, state spending increased by 2.62% year on year to PHP 505.6 billion in June.

“The increase was mostly attributed to the implementation of capital outlay projects of the Department of Public Works and Highways, and the Department of National Defense under its Revised AFP Modernization Program, the preparatory activities of the Commission on Elections for the 2025 National and Local Elections, and the higher National Tax Allotment shares of local government units (LGUs),” the Treasury said.

However, this was tempered by lower subsidy releases and lending to government-owned and -controlled corporations (GOCCs).

Primary expenditure (net of interest payment) rose by 2.3% to PHP 450 billion in June. Interest payments went up by 5.22% to PHP 55.6 billion.

GAP WIDENS

For the first six months, the budget gap widened by 11.2% to PHP 613.9 billion from PHP 551.7 billion a year ago.

The six-month deficit was 7.24% below the PHP 661.8-billion program for the period as revenues were better than expected.

For the January-to-June period, revenue collections jumped by 15.56% to PHP 2.15 trillion from PHP 1.86 trillion last year. It exceeded the PHP 2.08-trillion target for the first half by 3.49%.

Tax revenues, which accounted for 85% of the total revenues, rose by 10.05% to PHP 1.84 trillion as of end-June. This was 1.43% lower than the government’s first-semester goal of PHP 1.86 trillion.

BIR collections went up by 11.72% to PHP 1.36 trillion but missed the PHP 1.4-trillion target by 2.92%.

Revenues by Customs increased by 5.1% to PHP 455 billion and also exceeded the PHP 442.6-billion goal by 2.91%.

Nontax revenues in the first six months surged by 63.3% to PHP 314.2 billion from P192.4 billion last year. This was 46.10% higher than the PHP 215.1-billion target.

Treasury income jumped by 76% to PHP 163.9 billion “on account of higher dividend remittance, interest on advances from GOCCs, and NG share from PAGCOR (Philippine Amusement and Gaming Corp.) income.”

The Treasury exceeded the revised midyear program by 26.91% and is only PHP 23.1 billion short of the PHP 187-billion full-year target.

Meanwhile, expenditures for the January-to-June period increased by 14.6% to P2.76 trillion from PHP 2.41 trillion a year ago. It was 0.9% higher than the P2.74-trillion target for the six-month period.

Primary expenditure increased 12.06% to PHP 2.39 trillion in the first half from PHP 2.13 trillion a year prior.

In the first six months, interest payments jumped by 33.55% to PHP 377.2 billion from PHP 282.5 billion last year.

“While June showed improvement in deficit reduction, the first-half deficit widened year over year. However, the government’s ability to exceed revenue targets and keep the deficit below the midyear goal indicates some level of fiscal discipline,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

Mr. Roces said the challenge for the government is to keep a balance between revenue growth and spending to ensure the budget deficit is under control.

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co., said the government would still need additional funding for the priority programs that President Ferdinand R. Marcos, Jr. identified in his third State of the Nation Address (SONA).

“(Programs for) agriculture, infrastructure, and disaster preparedness needs funding, so where will it come from? The DoF said no new taxes. Likely from higher borrowings,” he said in a Viber message.

The NG’s borrowing program is set at PHP 2.57 trillion this year, of which 75% will come from domestic sources and the rest from foreign sources.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the collection of withholding taxes from online sellers, which started on July 15, is expected to boost tax revenues for the rest of the year.

“(The withholding tax collection) will help increase the country’s recurring tax revenues, narrow the budget deficit, and improve the overall fiscal performance,” he said.

For this year, the government set the deficit ceiling at 5.6% of gross domestic product, equivalent to PHP 1.48 trillion.

At the end of 2023, the budget deficit stood at PHP 1.51 trillion, exceeding the PHP 1.499-trillion ceiling. — Beatriz Marie D. Cruz