Debt-to-GDP ratio down to 44.9% in June

The country’s debt as a percentage of the gross domestic product (GDP) slid further as of June amid an expanding economy and decreasing borrowings due to higher revenues, according to the Department of Finance’s chief economist.

“A combination of robust revenue, lower deficit and stable interest rates led to the continuing drop in the debt-to-GDP ratio to 44.9 percent in June, from the end-2014 ratio of 45.4 percent,” Finance Undersecretary Gil S. Beltran said in an economic bulletin he provided to reporters on Friday.

“The strong fiscal position should provide adequate fiscal space to enable the economy to push growth to higher levels during the remainder of the year, even with the ongoing global financial volatility and threats of El Niño phenomenon,” he added.

Improved government spending helped the GDP grow by 5.6 percent in the second quarter, faster than the 5 percent in the first quarter, albeit slower than the 6.7 percent a year ago.

Also, the revenue effort or the share of the government’s collection of tax and other revenues to the GDP improved in the first half.

“The exceptional increase in revenue collections led to the [first-half] revenue effort rising from 15.5 percent last year to 17.1 percent, a 1.6-percentage point rise—the highest first-semester revenue effort increment ever achieved since 1994,” Beltran said.

In the first half, total revenue jumped by 16.3 percent to P1.1 trillion, which Beltran noted “outstripped” the 5.3-percent average growth in nominal GDP during the first semester.

Both tax and non-tax revenues also outgrew nominal GDP in the first half, he added.

“Tax revenue rose by 8.3 percent with Bureau of Internal Revenue (BIR) collection rising by 9.7 percent [to P705.9 billion] but Bureau of Customs (BOC) collections languished at 3-percent [growth to P178.6 billion] as oil taxes dropped due to lower prices,” Beltran noted.

Still, “net of oil taxes, BOC collections rose by 18 percent, likewise exceeding nominal GDP growth,” while revenue collections of other offices grew by 7.5 percent to P8.4 billion, he pointed out.

Hence, the first-half tax effort likewise improved from 13.7 percent last year to 14.1 percent, of which the 0.4-percentage point rise was “the highest tax-effort increment since 1997, excluding periods when new tax measures took effect.”

Beltran attributed the higher tax effort to “tax administration improvements.”

The tax effort of the BIR—the country’s biggest tax-collection agency, increased to 11.1 percent in the first half from 10.7 percent a year ago, while that of the BOC slightly slid to 2.82 percent from 2.88 percent last year.

As for non-tax revenues, these jumped by 76.3 percent to P192.7 billion due to the P60.1-billion coco levy fund-related remittance to the special account in the general fund.

First-half expenditures likewise rose by 8.5 percent to P1.1 trillion, exceeding the average first-semester GDP growth as well.

In this regard, the expenditure effort in the first half inched up by 0.5 percentage point to 16.9 percent from 16.4 percent last year, “boosting GDP growth by that magnitude, as capital outlays rose by 0.3 percentage point,” to 2.8 percent from 2.5 percent a year ago, Beltran explained.