• July budget gap widens 57.5% on-yr to P50.7B


    Deficit grew by 57.50 percent in first month of Duterte presidency

    THE Duterte administration recor-ded in July, its first month in office, a budget deficit of P50.7 billion, which was 57.50 percent larger than July 2015’s P32.19 billion or 12.19 percent more than P45.19-billion deficit incurred in the previous month.

    The increase was due to lower revenue and increased expenditure.

    However, data the Department of Finance released on Tuesday showed that the July deficit was P35.46 billion or 41 percent short of the P86.12 billion the government had targeted for the month, which brought the year-to-date tally 50 percent below the full-year target.

    Despite this, analysts believe that rapid economic growth that is expected would help the government achieve its full-year deficit target of 2.7 percent of gross domestic product (GDP) despite the expected slowdown of public spending.

    Cumulative deficit in the first seven months of 2016 stood at P170.98 billion, 827 percent higher than the P18.45-billion deficit during the same period in 2015.

    End-July deficit was 4 percent or P7.99 billion short of target for the seven-month period, and still 56 percent short of this year’s P388.87-billion program or 2.7 percent of GDP.

    Target doable
    Analysts from both Moody’s Analytics and Nomura in e-mailed responses to The Manila Times said the government’s deficit target of 2.7 percent of GDP is achievable amid the planned higher infrastructure spending and rapid economic growth.

    “We still think that the deficit target is achievable . . . the rapidly expanding economy will make the 2.7 percent target more achievable,” Jack Chambers, economist at Moody’s Analytics, said.

    Chambers said moving forward, the analytical firm does not view the budget deficit unfavorably, even if it widens in 2017, as expected.

    The reason for this is that much of the new spending is focused on infrastructure, which will boost the country’s potential output over the long-term, he explained.

    Euben Paracuelles, economist at Nomura, shared the view but warned of a possible lower deficit, given that spending growth is unlikely to be running at the same pace as in the last few months, which was boosted partly by the elections.

    “In addition, typically there are some administrative constraints to spending increases related to a change in government,” he said.

    “That said, any available fiscal space will likely be eventually utilized given the administration’s pro-growth stance,” he added.

    Revenues down
    The Bureau of Treasury (BTr) reported that total revenues in July this year amounted to P170.3 billion, down 5 percent or P8.2 billion against collections during July last year.

    This brought year-to-date collections to P1.27 trillion, 1 percent higher over the comparable period in 2015.

    “However, netting-out the one-off transfer of Coconut Levy assets in 2015 will result in year-to-date growth of 6 percent. Tax revenues accounted for 89 percent of collections,” the agency stated.

    In a breakdown, the Bureau of Internal Revenue (BIR) collections reached P117.4 billion for the month, recording its first year-on-year contraction for the year by 1 percent.

    Total BIR collection was P900.9 billion as of end-July, reflecting 9 percent growth year-on-year.

    Bureau of Customs (BOC) collections was up 3 percent for the month with actual collections of P31.0 billion. Year-to-date, BOC revenue to P221.5 billion.

    Total BTr Income amounted to P9.1 billion in July, down 36 percent or P5.1 billion from the previous year “due to lower income from bond sinking fund fund/security stabilization fund investments and national government deposits.”

    January to July total BTr income declined by 10 percent or P8.5 billion from the previous year broadly due to the same reasons, lowering the year-to-date collections to P72.8 billion.

    Collections from other offices contributed P12.8 billion for the month, down by 27 percent from the 2015 level.

    Year-to-date revenue of P76.0 billion indicates a P74.2 billion or 52 percent decline in collections over the same period last year “due to the aforementioned P60.1 billion transfer of Coconut Levy Assets which boosted receipts in May 2015,” the BTr said.

    Spending up
    The report also showed that government disbursements in July recovered from the previous month’s contraction to reach P220.9 billion, 5 percent or P10.2 billion higher than comparable figures last year.

    Year-to-date, expenditures stood at P1.44 trillion, 12 percent higher over the same period in 2015.

    Interest payments comprised 18 percent of the total expenditures and is down by 25 percent year-on-year to P40.0 billion, “mainly due to lower interest cost as a result of liability management transactions and high coupon debt that already matured,” it said.

    This brought the cumulative level to P193.7 billion, down 7 percent from last year and accounts for just 13.4 percent of total expenditures for January to July from 16.3 percent last year.

    Primary deficit
    Netting out interest payments from the expenditures, the government recorded P10.6 billion primary deficit for the month of July, a reversal of the previous year’s primary surplus of P20.9 billion.

    “Despite this, the national government was able to retain a year-to-date primary surplus of P22.7 billion, although significantly lower than the P190.7 billion posted for the same period in 2015,” the Treasury said.


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