Expenditures surge amid mild revenue growth
The Philippine government’s budget deficit more than doubled in June from a year earlier and from May, pushing the year-to-date tally far beyond the limit set for the month as revenue collections barely grew while expenditures soared.
The deficit hit P90.9 billion in June, swelling by 101 percent from a P45.2-billion gap a year earlier, data from the Bureau of the Treasury showed on Monday.
The yawning gap was wider by 172 percent from P33.4 billion in May.
Government revenue rose 2 percent to P179.8 billion in June from P175.6 billion a year earlier.
Collections by the Bureau of Internal Revenue (BIR) grew 6 percent to P131.2 billion from P124 billion, while Bureau of Customs (BoC) collections recorded zero growth from P35.4 billion a year ago.
From non-tax revenues, income dropped 8 percent year-on-year to P4.7 billion due largely to a decline in national government share in the remittances of the Philippine Amusement and Gaming Corp. income, which fell by P716 million.
“This was partially offset by higher interest income on NG [national government]deposits and collection of Foreign Exchange Risk Cover fees, which increased by P215 million and P243 million, respectively,” the Treasury bureau said.
Non-tax revenue from other offices showed a year-on-year contraction of 28 percent for a monthly total of P7 billion.
Expenditure, on the other hand, rose 23 percent to P270.7 billion in June from P220.8 billion a year earlier, with the bulk, or P251.4 million, going into “other expenditures.” The Treasury report showed no details under this item.
The Department of Budget and Management (DBM) is scheduled to report such details weeks from now.
The Treasury only said that part of the higher expenditure for the month may be attributed to the P35.5 billion budgetary support to government-owned and -controlled corporations, the amount of which more than doubled year-on-year.
The report also included figures for interest payments, which widened 9 percent year-on-year to P19.3 billion in June.
ING Bank Manila senior economist Joey Cuyegkeng said the report showing strong spending growth was much needed to quell scepticism as it indicated contribution to economic growth.
“I am not worried about the significant June fiscal deficit. This is catch-up spending to bring the first-half performance closer to program and contribute to overall GDP [gross domestic product]growth,” he said.
Cuyegkeng said strong spending growth should bolster second-quarter economic growth to exceed 6 percent.
“This, combined with the continued recovery in agriculture with a growth rate of 3 percent to 5 percent in the second quarter, could see second-quarter GDP growth at 6.3 percent to 6.4 percent,” he added.
‘Still on track’
Given the June deficit, the cumulative shortfall for the first half of the year deepened by 28 percent to P154.5 billion from P120.3 billion in the corresponding six-month period in 2016.
The latest deficit also surpassed the government’s P143.8 billion programmed deficit by 7 percent or P10.7 billion.
University of Asia and the Pacific (UA&P) economist Victor Abola said, however, the latest cash operations report showed the government remains on track in hitting its budget deficit program this year.
“This makes the full-year projected deficit more reachable,” Abola said.
The government has set a budget deficit target of P482.1 billion for full-year 2017, equivalent to 3 percent of the country’s GDP.
The bureau said January to June revenues grew 7 percent year-on-year to P1.176 trillion from P1.10 trillion in 2016.
Year-to-date expenditures registered growth of 9 percent to P1.33 trillion from P1.22 trillion.
In terms of interest payments in the year to June, the amount dropped 1 percent to P151.6 billion.
Primary budget in the six-month period posted a deficit of P2.9 billion, a reversal of the P33.4 billion surplus a year earlier.
‘No cause for concern’
“The higher-than-programmed deficit should not be a cause for concern,” Budget and Management Secretary Benjamin Diokno said. The amount of “expenditures is on the dot. Underspending, the plague of the previous administration, appears to be a thing of the past.”
Finance Secretary Carlos Dominguez 3rd remains optimistic about the revenue collections of the BIR and Customs despite the amounts falling short of target for the first half of the year.
The “BIR and BoC will certainly make up for the deficit in first-half tax collections in the third quarter,” Dominguez told reporters in a message via Viber.
During the period, tax revenues – consisting of collections by the BIR, the BoC and other offices – totaled P1.17 trillion, falling below the P1.19 trillion target by 1 percent or P16.6 billion.
“We are expecting P30 billion from Mighty,” Dominguez said, referring to the government’s expected total tax take from Mighty Corp.’s tax settlement offer, which he added, “will wipe out the P16.6 billion undercollection. This also proves that we need the tax reform [program]so we can collect more taxes.”