The national government’s budget gap in full-year 2015 widened from a year earlier but remained well short of the government’s target deficit to gross domestic product (GDP) ratio, the Department of Finance reported Thursday.
Data released by the DOF showed that the government registered a P121.7 billion fiscal deficit for the full-year 2015, up 66 percent or P48.6 billion from P73.1 billion gap in 2014.
Relative to the size of the economy, the agency said the full-year fiscal deficit rose to 0.9 percent of GDP, lower than the 2 percent program but higher than the 0.6 percent recorded in the previous year.
In December alone, the deficit for the month of December 2015 was recorded at P75.1 billion up 62 percent from P46.3 billion deficit a year earlier.
The government said that its fiscal performance last year is the direct result of good governance, but an analyst said the Philippines continues to lag in terms of public spending.
Primary budget surplus
In terms of primary budget, the data showed that the government recorded a P187.7 billion primary surplus for 2015, exceeding the government’s target of P78.1 billion but lower than the P248.1 billion primary surplus in 2014.
Primary budget figures exclude interest payments on foreign and domestic debt issues recorded during the month as an indicator of the management of expenditures apart from debt servicing. A primary budget surplus indicates that the government collected more revenue than it spent for projects and programs other than debt service.
Total revenue for the year amounted to P2.109 trillion, growing by 11 percent or P200.4 billion year-on-year from P1.908 trillion in 2014. The full-year collections were 7 percent lower than the government’s 2015 revenue target of P2.275 trillion.
Focusing on the year-on-year growth in revenue collection, the DOF said this drove the country’s tax to GDP ratio slightly higher to 13.7 percent from 13.6 percent in 2014.
According to the DOF data, collections by the Bureau of Internal Revenue (BIR) in 2015 reached P1.433 trillion, 7 percent higher than last year’s level of P1.334 trillion.
Meanwhile, the Bureau of Customs (BOC) collections eased 0.47 percent year-on-year to P367.5 billion from P369.3 billion a year earlier.
The DOF explained that as the price of oil fell to record-low levels in 2015, collections on oil sagged by as much as 31 percent. This was compensated to some extent by non-oil collections, up 9.3 percent from year-ago levels.
By contrast, total Bureau of Treasury income for the year rose 18 percent to P110 billion from P93.4 billion, “consistently performing in top shape, attuned to the global market and striking at the most opportune time,” according to Finance Secretary Cesar Purisima.
“Our people now have a more resilient and healthy debt profile helping, and no longer hurting, our macroeconomic standing,” he said.
Collections from other offices also widened by 78 percent to P198.1 billion from 2014’s P111 billion.
Govt spending accelerates…
Despite increasing 13 percent from 2014, government disbursements continued to lag, falling 13 percent short of the government’s programmed goal of P2.558 trillion.
Disbursements by the national government in 2015 amounted to P2.230 trillion, up from the P1.981 trillion a year ago, the DOF reported.
The DOF further reported that interest payments for the year declined slightly by 4 percent to P309.4 billion from P321.2 billion in 2014.
“As a percentage of expenditures, interest payments fell by 2.3 percentage points to 13.9 percent for the year from 16.2 percent the year prior. Persistent narrowing of our interest payments to expenditure ratio means we have much more money available for productive expenditures,” Purisima said.
…But still lags region
While the improvement in spending is a welcome development–as the national government has found a way to improve spending without resorting to Disbursement
Acceleration Program–the government continues to lag the region, Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands (BPI).
“Increased spending, however, is reminiscent of previous administrations’ behavior to step up spending to close out a term to gain brownie points for projects that they can put their name on,” he added.
“Government spending continues to lag the region, despite our very affordable fiscal space. Depending on who wins in June, we may see very different fortunes in this matter,” he said.
Joey Cuyegkeng, ING Bank Manila senior economist, said the 2015 deficit-to-GDP ratio of 0.9 percent implies that there is still much that government can do to remove or reduce spending drag so that government can spend closer to program levels.
“With external and weather-related drags to economic activity and the need for catch-up infrastructure spending, government initiatives to expand delivery of basic services would work wonders for the economy and bring about growth closer to government targets. With the expansion of delivery of services to the population, growth can become more inclusive,” he said.