Gov’t fiscal gap wider by 54.08% to P99.1 billion in October –Treasury

The Philippine government’s fiscal balance saw a wider year-on-year deficit in October as growth in state revenues outpaced the increase in spending during the period, data released by the Bureau of the Treasury (BTr) on Friday showed.

The national government’s budget deficit last month stood at P99.1 billion, up 54.08% from the P64.3-billion fiscal shortfall posted in the same period the previous year.

The wider deficit resulted from the 22.23% year-on-year acceleration in government spending, which outperformed the 14.14% growth in revenue.

Despite the wider year-on-year fiscal gap, October’s shortfall is the narrowest in two months since August’s P72.04-billion.

The year-to-date budget shortfall, meanwhile, amounted to P1.1 trillion, 7.61% lower than the P1.2-trillion gap seen in the 10-month period a year ago and accounted for 67% of the P1.7 trillion full-year fiscal gap ceiling.

Compared to September this year, the fiscal balance gap in October was narrower than the prior month’s P179.8-billion deficit.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the wider year-on-year budget deficit was “partly due to higher inflation as higher prices may have required more government spending, as well as a weaker peso exchange rate in recent months (that increased the peso equivalent of foreign debts and debt servicing) and higher local and US/global interest rates that increased debt servicing for the government's debts.”

“Nevertheless, the economy reopened further towards greater normalcy that fundamentally boosted tax revenue collections on a year-on-year basis, while also somewhat reducing the government's COVID-related expenditures since there are no more large-scale lockdowns so far this year (compared to pockets of hard lockdowns in 2021), while also pushing for greater fiscal discipline amid the priority of narrowing the budget deficit and temper the growth in the national government's overall debt after incurring large borrowings of nearly P6 trillion since the pandemic started in 2020,” Ricafort said.

Expenditures

The national government’s disbursements grew to P387.9 billion from P317.4 billion in the same month last year.

The Treasury said the higher spending in October was "driven partly by higher National Tax Allotment of LGUs (local government units) and subsidy releases for programs implemented by government corporations, namely National Health Insurance Program under the PhilHealth (PHIC), Irrigation Systems Restoration Program and Irrigation Systems Development Program of the National Irrigation Administration (NIA), Comprehensive and Integrated Housing Program of the National Housing Authority (NHA), and Missionary Electrification Program under the National Power Corporation (NPC).”

The BTr said disbursements for the social protection programs of the Department of Social Welfare and Development (DSWD) and road infrastructure projects of the Department of Public Works and Highways (DPWH) also contributed to the higher October 2022 spending.

The national government has disbursed P4.1 trillion, representing 82% of the P5-trillion program.

The year-to-date expenditures grew by 9.87% from January to October 2021, with actual spending at P3.7 trillion.

Primary expenditures stood at P354.7 billion, up 24.11%, and accounted for 91% of the total monthly spending.

On a year-to-date basis, the primary expenditures reached P3.6 trillion, up 9.10% year-on-year.

Total Interest Payment (IP), meanwhile, reached P33.2 billion in October, up 5.23% year-on-year.

The January to October IP totaled P433.2 billion, higher than last year’s P370.9 billion.

Revenues

The national government’s October revenue collection totaled P288.9 billion, 14.14% above the P253.1 billion collected in the same month last year.

The Treasury said the October collection brought the year-to-date state revenues to P2.9 trillion, up 18.31% from P2.5 billion raised in January to October 2021.

The cumulative collections are 89% of the P3.3 trillion revenue target for the entire year.

The BTr said tax collections accounted for 90% or P2.6 trillion of the total while non-tax revenue contributed P299.5 billion.

The Bureau of Internal Revenue (BIR) brought in P186.8 billion for October, up 15.20% year-on-year.

The BIR’s January to October collections stood at P1.9 trillion, up 12.56% over the same period last year and reaching 80% of the P2.4 trillion target.

The Bureau of Customs (BOC), on the other hand, collected P75.1 billion in October, outpacing last year’s collection of P55.5 billion by 35.16%.

The BOC’s year-to-date collection amounted to P713.5 billion, up 35.81% year-on-year and 99% of the P721.5 billion full-year goal.

The Treasury saw its income grow by 47.24% in October to P13.2 billion.

“This was due to higher national government share from PAGCOR (Philippine Amusement and Gaming Corp.) profit and BSF (bond sinking fund) investment performance which offset lower dividend remittance,” the BTr said.

Total Treasury collections as of end-October grew by 24.82% to P142.9 billion from P114.5 billion.

Other non-tax collections in October, including privatization proceeds and fees and charges, slowed by 44.42% to P13.7 billion from P24.7 billion posted in the same month last year.

However, the cumulative other non-tax collections of P156.6 billion outpaced the P30.2 billion seen from January to October 2021 by 23.9%.

Deficit-to-GDP

The Treasury said the third quarter budget deficit stood at 6.46% of the gross domestic product (GDP), lower than the 9.19% posted in the same period last year.

The economy as measured by GDP grew by 7.6% in the third quarter, faster than the 7.5% growth recorded in the second quarter.

The BTr said the deficit-to-GDP ratio for the first three quarters slowed to 6.51% from 8.29% a year ago.

“The new administration needs to sustain the country’s economic and fiscal reform measures, in terms of tax reform measures, intensified tax collections to structurally improve further the government’s recurring tax revenue collections, as well as good governance/anti-corruption/ anti-wastage measures to further improve government expenditures, all of which help better manage country’s budget deficit, fiscal performance, and overall debt management,” Ricafort said. — DVM, GMA Integrated News