The national government reported spending far more than it earned from taxes and other forms of revenue in the first six months this year, as public spending accelerated. This development is more in keeping with the policy direction indicated by President Duterte in his State of the Nation Address, where he called for the widening of the budget deficit parallel to planned reductions in both personal and business tax rates. The plan is for the deficit to equal 6 percent of local output or the gross domestic product from 5 percent originally.
Based on Bureau of the Treasury data submitted to the Department of Finance, the national government incurred a budget deficit of P120.3 billion in the January-to-June period, a reversal from the P13.7-billion surplus in the same period last year.
At end-June 2016, double-digit public-sector disbursements, a closely watched driver of economic growth contributing about a tenth to GDP, reached P1.22 trillion, higher by 14 percent from P1.07 trillion last year.
Revenues, on the other hand, totaled P1.1 trillion in six months to June, up by only 1 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 percent, or P75.3 billion, in the first half.
The Bureau of Internal Revenue (BIR), the main collection arm, came up with P783.4 billion, 11 percent more than the past year’s P705.9 billion.
The Bureau of Customs (BOC) added P190.6 billion to the government’s first-semester revenues, an increase of 7 percent year-on-year from P178.6 billion, while the Treasury’s income fell 5 percent to P63.7 billion.
Interest payments, which took up nearly 13 percent of total spending, amounted to P153.7 billion, down 2 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 the 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 was seen finalized by the DBCC at its next meeting.
To address persistent underspending despite healthy revenue growth reported by the previous administration, the economic managers under President Duterte vowed to accelerate public spending by fast-tracking infrastructure development necessary to sustain the rapid modernization of the economy. Under the new administration, government infrastructure spending were to equal 6 percent of GDP, exceeding the previous administration’s 5-percent goal.
The deficit aggregated 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 7 percent to P175.6 billion, from P163.6 billion in the previous year, while disbursements amounted to P220.8 billion, lower by 7 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 percent 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.