But public spending lags despite 18% collection growth
The budget deficit of the national government narrowed 60 percent in the first quarter of 2015 from a year earlier as the rise in public spending trailed the increase in revenue collection during the period, the latest official data shows.
The government incurred a P33.51 billion fiscal deficit in the first three months of the year, smaller by P50.60 billion from an P84.12 billion gap posted in the first quarter of 2014, data released by the Department of Finance (DOF) on Monday shows.
Revenue collections during the period topped P470 billion, while disbursements reached more than P504 billion.
Looking at the increases in both revenue collections and public spending, a private analyst also sees the shortfall against the official targets, tagging the government as the “weakest link” in the chain that links revenue generation to the national economic growth targets.
Revenue grows 18%, spending up only 4%
Total revenue by end-March 2015 grew 18 percent or P72.11 billion year-on-year to P470.53 billion.
Meanwhile, disbursements by the national government rose by only 4 percent or P21.5 billion to a total P504.04 billion.
Short of the targets
There also appears a lot of room for spending to grow as the budget deficit for January to March was 66 percent below the P98.1 billion ceiling set for the period.
Compared with the government’s P484.1 billion goal, revenues missed the mark by 3 percent or P13.6 billion.
But the shortfall in public spending measured against the target was even bigger at 13 percent.
Seeing the missed targets, Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands (BPI), tagged the government as the economy’s “weakest link.”
Mapa said government spending continues to be a head-scratcher despite its more than 4 percent growth in the first quarter.
Although he sees the increase as positive, Mapa said spending does not seem to demonstrate the resolve of the government to pump-prime the economy and prepare the Philippines to take the next step in its growth path.
“Despite all their pronouncements and pledges, government spending remains
lackluster and lackadaisical, devoid of the urgency that we had hoped they’d deliver. A true disappointment to say the least, in their five-year of operation,” the BPI economist added.
Mapa, however, expects a rebound in disbursement in the second quarter if the government proves that it could spend more despite the reforms in the budget process.
“They’re currently behind program in a big way, 66 percent below their own target.
We do expect or hope for some rebound in the second quarter but once again, the onus on proving they can spend sans the backdoor measures of the DAP is squarely on the Administration. They finish below target once more and retain the tag of the economy’s weakest link,” he said.
The DOF’s view
Finance Secretary Cesar Purisima, however, pointed out that the continued uptrend in both revenue collections and spending in the first quarter of 2015 clearly exhibits the commitment of the government to ensuring that macroeconomic fundamentals remain sound.
In terms of primary budget, which excludes interest payments on foreign and domestic debt issues, the data shows that the government recorded a P67.1 billion primary surplus for the first quarter, more than triple the primary surplus of P19 billion a year earlier.
Interest payments on foreign and domestic debt issues recorded during the month serve 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.
Interest payments, which comprise 20 percent of the total expenditures for the quarter, dropped 2 percent or P2.5 billion year-on-year.
“As expenditure figures continue to pick up, I believe a whole-of-government approach to boosting spending and improving agency absorption capacities will be instrumental in widening these figures further,” Purisima said.
Collection trend has ‘kept moving up’
According to the DOF data, collections by the Bureau of Internal Revenue (BIR) for the three-month period reached P307.08 billion, 16 percent higher than the year-earlier level, while the Bureau of Customs (BOC) collections rose 7 percent to P92.29 billion.
“I am pleased to note that the BIR notched consistent double-digit year-on-year growth for each month of the quarter. Further, despite lower oil prices, BOC collections still managed to continue growing. The key is always to look at the overall trend lines—and for the recent years they have kept moving on up,” Purisima said.
Meanwhile, total Bureau of Treasury income in three-months to March rose 81 percent to P37.87 billion on higher interest income from deposits and bond holdings, as well as dividend collections.
Collections from other offices widened 27 percent to P33.27 billion.
“Robust revenue growth drives the expansion of our fiscal space. This is a critical foundation of the virtuous cycle we are consolidating toward the last year of this administration. I am encouraged looking at the ever improving trend lines being posted by our revenue generating agencies,” Purisima said.
The Finance secretary expects the trend to curve up further as the government continues to pursue its legislative agenda on boosting its tax administration capacity and modernizing the BOC.
“Recently, the Department of Finance and the Department of Trade and Industry came up with a consolidated position on our proposed Tax Incentives Management and Transparency Act, a reform that will enable us to leverage tax incentives in a more efficient and transparent manner. Using data to inform public policy decisions is a long-awaited development in our bid for greater competitiveness,” he said.
Purisima stressed that the government will continue to push for proactive liability management, noting that the Treasury bureau rolled out its Non-Restricted Trading and Settlement initiative for peso-denominated coupon bearing Government Securities (GS), enabling tax-exempt institutions to deal their securities and access investments from secondary market trades with the active taxable sector.
“I expect this initiative to promote liquidity in the market, as well as price discovery or transparency,” he said.