PHL fiscal deficit sharply narrows in August

Diego Gabriel C. Robles

The National Government’s budget deficit sharply narrowed in August, as the growth in government revenues outpaced expenditures, the Bureau of the Treasury (BTr) reported on Friday.

In a statement, the BTr said the budget gap stood at P72.04 billion in August, 40.43% lower than the P120.9 billion in the same month a year ago.

Government expenditures rose 6.39% to P404.48 billion during the month, “owing to higher National Tax Allotment (NTA) transfers and Interest Payments (IP).”

On the other hand, total revenue collection jumped 28.23% to P332.44 billion in August from P259.3 billion in the same period last year. This was driven by a 27.27% rise in tax revenues to P308.44 billion, and a 42.06% increase in nontax revenues to P23.99 billion.

The bulk of tax revenues came from the Bureau of Internal Revenue (BIR) with P228.94 billion, up by 23.03% year on year, accounting for “the highest monthly nominal growth for the first eight months of the year.”

Likewise, collections by the Bureau of Customs (BoC) surged 47.84% to P78.88 billion.

At the same time, nontax revenues from the BTr jumped 4.87% to P4.91 billion, while other offices posted a 56.3% growth to P19.1 billion.

“The BTr’s income for August slightly went up… largely due to higher NG share payments from PAGCOR (Philippine Amusement and Gaming Corporation) and BTr investment income,” the Treasury said.

“Collection from other offices [include] privatization proceeds and fees and charges for August,” it added.

John Paolo R. Rivera, an economist at the Asian Institute of Management, also said that the narrowing of the fiscal deficit is due to the faster growth in collections paired with a slowdown in spending on big ticket items.

“However, this figure may be temporary as succeeding months registered scenarios that compelled spending such as subsidies, relief, calamity expenses,” he said via Viber. “Government needs to generate revenues faster than its expenditures.”

Primary expenditures, or spending net of interest payments, expanded by 4.9% to P373.7 billion, while interest payments increased 28.59% to P30.77 billion in August. The latter was “due to the low base effect of the advanced payment of Global Bonds,” the BTr said.

In the first eight months of 2022, the budget deficit narrowed to P833 billion, 13.06% lower than the P958.2 billion gap a year ago.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the narrower budget gap to the further reopening of the economy that boosted tax revenue, as well as the reduction of pandemic-related expenditures.

“The government is also prioritizing fiscal discipline amid the priority of narrowing the budget deficit and tempering the growth in the overall debt after incurring large borrowings of more than P5 trillion since the pandemic started in 2020,” Mr. Ricafort said in a Viber message.

“The BoC [also] posted record revenues on a monthly basis as imports picked up with the re-opening of the economy, and import values bloated by relatively higher prices of imported oil and other commodities largely brought about by Russia-Ukraine conflict,” he added.

Total revenue collection by the National Government jumped by 18.09% to P2.37 trillion in the eight months leading to August from P2.01 trillion in the same period last year. It is already 72% of the P3.3 trillion full-year program.

Tax revenues, which accounted for 89.96% of the total, jumped by 17.3% to P2.13 trillion during the eight-month period. This was driven by the 12.25% increase in BIR collections to P1.56 trillion, and 35.64% rise in BoC collections to P559.2 billion.

Of its full-year programs, the BIR and the BoC already collected 65% and 78% respectively as of end-August.

Nontax revenues, on the other hand, went up 25.69% to P237.9 billion, thanks to a 22.5% rise in BTr revenues to P122.4 billion.

On the other hand, year-to-date expenditures rose 8.02% to P3.2 trillion from P2.96 trillion in the same period last year, already making up 65% of its expenditure program for 2022.

Primary expenditures stood at P2.86 trillion from January to August, up by 7.08% year on year.

Interest payments increased 16.67% to P340.1 billion.

The government expects the budget deficit to hit P1.65 trillion this year, slightly lower than the actual deficit of P1.67 trillion in 2021.

As of the first quarter, the budget deficit as a ratio of the gross domestic product (GDP) stood at 6.4%.

The government aims to reduce the deficit to 7.6% of GDP this year, and further to 6.1% in 2023, 5.1% in 2024, 4.1% in 2025, 3.5% in 2026, 3.2% in 2027, and 3% in 2028.