Budget gap narrows in September as collections improve

MANILA, Philippines — The national government’s budget gap narrowed in September while expenditures slowed amid a larger tax haul. 

Data released by the Bureau of the Treasury on Wednesday showed that the budget deficit pared down 0.64% year-on-year to P179.8 in September. In the first nine months, the deficit amounted to P1.0 trillion, 11.09% slimmer compared with a year ago.

The deficit means the government continued to spend beyond its means, as authorities try to meet the country’s pandemic needs while revenues from tax and non-tax collections remain tepid due to anemic economic activity. To bridge the budget gap, the government would have to borrow money from creditors.

Data broken down showed revenues, mostly comprised of tax collections, advanced 24.79% to P288.8 billion in September. Year-to-date, the haul ballooned 18.79% to P2.66 trillion in the first nine months, accounting for 80% of the target. 

Treasury collections rose 30.29% year-on-year to P7.3 billion in September due to a higher share of profits from Pagcor, their managed funds and interest from deposits from the national government. As it is, the Treasury haul already exceeded its full-year target by P68.5 billion. 

Expenditures still grew at a pace of 13.63% year-on-year P468.6 billion, higher by the state’s increased capital expenditures and national tax allotments for local government, among others. Government spending inched up 8.71% on-year to P3.67 trillion in the first nine months. 

The narrowing of the budget deficit is a welcome development for a government that has been trying to temper the growth of debts that have piled up because of the pandemic. Despite this, Nicholas Antonio Mapa, senior economist at ING Bank in Manila, expects the budget balance to stay in a deficit this year. 

“Despite showing a strong pickup in revenue collection, in particular for Bureau of Customs (due to oil price spike), national government still posted a deficit as expenditures were up 14%,”  he said in a Viber message.

Mapa explained that the budget gap levels could leave the debt-to-gross domestic product ratio high, further limiting the national government’s ability to introduce stimulus to the economy. As it is, some economists are concerned that economic growth could be constrained by rising inflation and the Bangko Sentral ng Pilipinas’ response to cool down demand by hiking interest rates. 

“Furthermore, elevated debt to GDP levels keep PHL susceptible to ratings action from at least one of the big 3 ratings agencies,” Mapa added.