The national government’s budget balance swung back to a deficit in the first semester of the year, with public spending expanding by double digits from a year ago, data from the Bureau of the Treasury (BTr) showed.
The Department of Finance (DOF) said based on the BTr’s report it submitted, the national government incurred a budget deficit of P120.3 billion in January to June this year, a reversal from the P13.7 billion surplus in the same period last year.
At end-June 2016, the country’s public spending, a closely watched driver of economic growth as it contributes about a tenth to gross domestic product (GDP), reached P1.22 trillion, higher by 14 percent from P1.07 trillion last year.
Government revenues, on the other hand, totaled P1.1 trillion in six months to June, up by only one percent from last year’s P1.08 trillion.
Netting out the one-time remittance of the Coco levy proceeds in May 2015 boosted year-on-year revenue growth to 7% or P75.3 billion for the first half of the year.
Collections of the Bureau of Internal Revenue (BIR), the government’s main tax agency, totaled P783.4 billion, 11 percent more than the past year’s P705.9 billion.
The Bureau of Customs (BOC) added P190.6 billion to government’s first-semester revenues, an increase of seven percent year-on-year from P178.6 billion, while the Treasury’s income fell five percent to P63.7 billion.
Interest payments, which took up nearly 13 percent of total spending, amounted to P153.7 billion, down two percent from last year’s P156.1 billion.
Netting out interest payments, the government ended the first semester with a P33.4 billion primary surplus, lower than P169.9-billion primary surfeit in 2015’s January to June period.
The assessment of fiscal performance against the government’s updated budget target for the first half is not available since the previous Cabinet-level Development Budget Coordination Committee (DBCC) was not able to sign off on the 2016 quarterly fiscal program.
The updated budget target is expected to be finalized by the DBCC in its next meeting.
Accelerating public spending
To address persistent underspending despite healthy revenue growth seen in the previous administration, the new economic managers under the Duterte administration vowed to accelerate public spending by fast-tracking infrastructure development necessary to sustain the rapid modernization of the Philippine economy.
Under the new administration, government infrastructure spending is targeted to be equivalent to six percent of GDP, exceeding the previous administration’s five percent goal.
Meanwhile, the budget deficit amounted to P45.2 billion in June alone, down by 38 percent from P72.7 billion a year ago but higher than P17.7 billion in May this year.
Broken down, government revenues rose seven percent to P175.6 billion from P163.6 billion in the previous year, while disbursements amounted to P220.8 billion, lower by seven percent compared with P236.2 billion a year ago.
Government revenues in June were lower by 12 percent from P199.8 billion in the previous month, while expenditures grew by 1.5 percent compared with P217.4 billion in May 2016.
In May 2016, government revenues dropped 18 percent year-on-year from P242.5 billion.
The BIR collected P151.6 billion and P124 billion worth of taxes in May and June, respectively.
The BOC’s total revenue collection in May and June amounted to P32.1 billion and P35.3 billion, respectively.
The national government also plans to ramp up infrastructure spending outside Metro Manila to create more jobs and ensure growth is felt in the other regions and rural areas.
The DBCC earlier revised the medium-term fiscal program, enlarging the deficit ceiling to 3 percent of GDP to allow more public investments in badly needed infrastructure and support social services.
The DBCC also revised the 2016 deficit ceiling to 2.7 percent of GDP from the original 2 percent program following the first half performance of revenue and expenditure.
The Cabinet-level committee also cut the 2016 economic growth target to 6 to 7 percent from the earlier goal of 6.8 percent to 7.8 percent.
The economic managers’ much lower goal for this year was due to tapering effect of election spending, slow agricultural output due to El Niño, lower infrastructure due to seasonality, and weak external trade.