Fiscal balance swings to deficit in June, but 1st half gap shrinks

By Karl Angelo N. Vidal
Reporter

THE NATIONAL GOVERNMENT’s fiscal balance swung to a deficit in June after two straight months of surplus — even amid relatively flat state spending and a double-digit hike in tax collections — with the first half nevertheless yielding a much smaller budget gap than a year ago, the Bureau of the Treasury reported on Monday.

Treasury data bared a P41.8-billion fiscal deficit last month that was 22.93% smaller than the year-ago P54.3 billion, as revenues grew 4.32% to P233.9 billion from P224.2 billion and expenditures slipped by 0.99% to P275.7 billion from 278.5 billion.

Tax collections, which contributed 90% to total revenues, increased by 11.85% to P210.5 billion from P188.2 billion. The Bureau of Internal Revenue (BIR), which accounted for three-fourths of tax collections and 67.46% of total revenues, collected 15.39% more at P157.8 billion from P136.8 billion, while the Bureau of Customs, which contributed less than a fourth to tax collections and more than a fifth to total revenues, raked in 2.5% more at P51.3 billion from P50 billion.

Last month also saw non-tax revenues — consisting mainly of subsidies for taxes on government transactions — fall by 35.06% to P23.4 billion from P36 billion even as the Treasury collected 37.13% more at P10.7 billion, compared to P7.8 billion a year ago, while other offices’ take was more than halved to P12.7 billion from P28.2 billion.

Despite the mid-April approval of the P3.662-trillion national budget that caused government expenditures to increase by 7.8% in May (with primary expenditures — or net of interest payments — growing by nine percent that month), a 3.06% drop to P246.6 billion in June’s primary expenditures — which include spending on infrastructure and other capital outlays — from P254.4 billion a year ago offset a 20.91% rise in interest payments to P29.1 billion from P24.1 billion.

FIRST-HALF DEFICIT SMALLER
The year-to-date budget balance stood at a P42.6-billion deficit that was 77.91% smaller than the year-ago P193-billion gap.

Total revenues increased by 9.71% to P1.548 trillion last semester from P1.411 billion a year ago, with tax revenues growing by a tenth to P1.381 trillion from P1.255 trillion. The BIR collected 10.56% more at P1.066 trillion from P964.5 billion, while Customs grew collections by 8.45% to P303 billion from P279.4 billion.

Non-tax revenues increased by 6.95% to P166.6 billion from P155.8 billion, as the Treasury increased collections by 32.48% to P87.6 billion from P66.1 billion while other offices’ take dropped 11.89% to P79 billion from P89.7 billion.

The government spent 0.83% less at P1.59 trillion last semester from P1.604 trillion a year ago, as a 1.94% drop in primary expenditures — “mainly because the government operated under a reenacted budget during the first four months of 2019” as well as the ban on new public works 45 days ahead of the May 13 midterm elections — to P1.41 trillion from P1.438 trillion offset an 8.8% increase in interest payments to P180.1 billion from P165.5 billion.

“We are still making our analysis, but basically the decline is due to delayed passage of the 2019 GAA (General Appropriations Act) and ban on implementation of projects due to the local and national elections,” Budget Assistant Secretary Rolando U. Toledo said in a mobile phone message when asked for an explanation for June’s smaller public spending.

The government operated on a reenacted 2018 budget from January to April 15, when President Rodrigo R. Duterte signed this year’s national budget into law but vetoed P95.3 billion in appropriations that he said were not in accordance with the administration’s priorities, slashing the total to P3.662 trillion.

The delay prompted the inter-agency Development Budget Coordination Committee (DBCC) in mid-March to cut its 2019 GDP growth assumption to 6-7% from 7-8% originally.

Economic managers had also blamed delayed budget enactment for the slowdown in GDP growth in the first quarter to 5.6% — its worst quarterly performance in four years.

Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila, said the spending drop could result in “lackluster” second-quarter GDP growth, which will be reported on Aug. 8. “Despite the government’s best efforts to implement ‘catch up spending’, the projected misstep coming from the government spending side coupled with possible handicapped capital formation could mean 2Q GDP struggles to get past six percent again,” Mr. Mapa told reporters in an e-mail.

Still, Mr. Mapa said the Philippines could end 2019 at the lower-end of the state’s 6-7% GDP target on the back of reinvigorated household spending, a resurgence in capital formation as the Bangko Sentral ng Pilipinas cuts policy rates further and stepped-up government spending.

Meanwhile, Rizal Commercial Banking Corp. economist Michael L. Ricafort said the year-on-year increase in BIR collections signals “improvements in recurring revenue collections that reflect improvement in overall fiscal performance,” which could lead to further upgrades in the country’s credit ratings.

According to the latest DBCC meeting last week, revenue collections are projected to reach P3.15 trillion in 2019, equivalent to 16.4% of GDP. Disbursements, meanwhile, are targeted to reach P3.77 trillion this year, equivalent to 19.6% of GDP.

The programmed deficit ceiling was maintained at 3.2% of GDP from 2019 to 2022 “to sustain the government’s investments on infrastructure and human capital development.”