NG budget deficit widens in June

The national government's (NG) budget deficit widened by 9.39% in June as spending outpaced revenue growth, although the first-half fiscal gap remained broadly in line with the government’s program, Bureau of the Treasury (BTr) data showed.

In a statement on Thursday, the Treasury said the budget gap ballooned to PHP 264.3 billion from PHP 241.6 billion in the same month last year.

“The 9.39% (or P22.7-billion) increase in the fiscal gap was underpinned by a 5.51% year-over-year growth in expenditures outpacing the 2.46% increase in revenue collection,” the BTr said.

Month on month, the budget balance widened from the PHP 198.5-billion deficit in May.

Government expenditures increased by 5.51% to PHP 578.7 billion in June from PHP 548.5 billion a year ago. The BTr said faster spending was driven by local government units’ higher share of the National Tax Allotment, and subsidy releases to government-owned and -controlled corporations (GOCC) such as Food Terminal, Inc. for the implementation of the Rice-for-All Program.

The Treasury also attributed the increase in disbursements to direct payments made by development partners to suppliers or contractors of various foreign-assisted rail transport projects of the Department of Transportation.

Primary expenditure (net of interest payments) rose by 5.14% to PHP 516.3 billion in June from PHP 491.1 billion in the same month last year. This accounted for 89.22% of total disbursements.

Interest payments increased by 8.73% to PHP 62.4 billion from PHP 57.4 billion a year prior.

In June, NG recorded a primary deficit of PHP 201.9 billion, widening by 9.59% from the PHP 184.2-billion gap a year ago.

Meanwhile, total revenue collection went up by 2.46% to PHP 314.5 billion from PHP 306.9 billion in the same month a year ago, as higher tax revenues failed to offset a 43.53% decline in nontax revenues.

Tax revenues, which accounted for the bulk or 95.2% of total collections, rose by 6.86% to PHP 299.3 billion from PHP 280.1 billion a year ago.

Collections by the Bureau of Internal Revenue (BIR) increased by 5.07% to PHP 210.7 billion in June from PHP 200.5 billion a year prior. Bureau of Customs (BoC) collections jumped by 11.88% to PHP 86.2 billion from PHP 77 billion a year earlier.

The Treasury attributed the higher BIR collections to “intensified tax administration and enforcement efforts, ongoing modernization initiatives, and improved taxpayer compliance.” 

On the other hand, nontax revenues plunged to PHP 15.1 billion in June from PHP 26.8 billion a year ago.

Broken down, the Treasury’s revenues slumped by 58.45% to PHP 6.7 billion, while revenues from other offices slid by 21.17% to PHP 8.5 billion.

The Treasury attributed the decline to earlier remittance of dividends this year.

Six-month budget gap

For the January-to-June period, the fiscal gap widened by 2.79% to PHP 786.8 billion from the PHP 765.5-billion deficit last year, BTr data showed.

This represented 47.4% of the upwardly revised PHP 1.66-trillion program approved by the Development Budget Coordination Committee (DBCC).

Total revenue collections rose by 5.67% to PHP 2.39 trillion in the six-month period from PHP 2.26 trillion recorded in the same period a year ago. This was 49.68% of the PHP 4.81 trillion program for the year.

As of end-June, tax revenues increased by 5.38% to PHP 2.14 trillion, as BIR collections went up by 4.96% to PHP 1.63 trillion and Customs collections rose by 7.21% to P491.9 billion.

“The year-to-date improvement in (BIR) collections was driven by higher collections from corporate income tax, personal income tax, value-added tax (VAT), other percentage taxes, and miscellaneous taxes,” the Treasury said.

It attributed the increase in BoC collections to a 10.34% rise in VAT collection, mainly due to higher oil prices.

“These gains effectively offset the 2.73% drop in excise collections, partly due to the decline in the volume of oil imports and the temporary suspension of excise tax on LPG  and kerosene,” it added.

Nontax revenues increased by 8.26% to PHP 246.5 billion as of end-June, as a 25.79% jump in BTr income to PHP 182.7 billion offset the 22.63% drop in other offices’ revenues to PHP 63.8 billion.

Meanwhile, expenditures increased by 4.94% to PHP 3.18 trillion in the January-to-June period from PHP 3.03 trillion a year ago. This was already 49.1% of the DBCC’s PHP 6.47-trillion disbursement program.

The primary budget deficit narrowed by 13.56% to PHP 303.1 billion in the first six months from PHP 350.7 billion in the same period last year.

‘Always confident’

Finance Secretary Frederick D. Go said that he remains confident the fiscal level will remain within target for the second half of the year.

“We are always confident,” he told reporters on Thursday. “The DoF is confident about the abilities of our revenue-generating agencies to be able to meet their targets for the second half of the year.”

According to BTr, the first-half gap was PHP 1.4 billion or 0.17% narrower than the government’s PHP 788.2-billion program.

Total revenue collections missed the PHP 2.388.5-trillion target by just 0.01%, after tax revenues missed the PHP 2.16-trillion program by 0.77%. Nontax revenues exceeded the first-half program of PHP 230.2 billion by 7.09%.

First-half expenditures were also lower by just 0.05% compared with the PHP 3.176-trillion program for the six-month period.

The primary deficit was 2.16% higher than the PHP 296.7-billion gap under the program.

“Looking ahead, we believe the government still has room to continue pump-priming the economy in the second half of the year while remaining within its fiscal targets,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

However, she warned that NG’s fiscal space is becoming increasingly constrained.

“As such, we expect public spending to be focused on high-multiplier investments, particularly infrastructure and labor-generating projects, which are likely to provide the greatest boost to growth while preserving fiscal sustainability,” she added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the war in the Middle East led to weaker economic growth which slowed down government revenues.

“Reform measures to further improve the NG’s fiscal performance and debt management, as well as priority reform measures… would help increase government revenues and reduce government expenditures,” he said in a Viber message.

However, Mr. Ricafort said the expected acceleration in  second-half spending “would fundamentally widen the budget deficit in the coming months.” — Justine Irish D. Tabile, Senior Reporter