Deficit spending off to muted start

The Duterte administration has started to make good on its promise to spend more for the country’s creaking infrastructure, but this is apparently still not happening fast enough.

According to the Department of Finance, the government incurred a fiscal deficit in October 2016, but it was sharply lower compared to that of the same month a year ago.

Based on the Bureau of the Treasury report submitted to Finance Secretary Carlos Dominguez III, the government’s budget deficit shrank by 91 percent to P2.3 billion in October from P27 billion in the previous year.

According to the DOF statement, the muted level of state spending—in which an increase is necessary to boost economic activity in the country—was compounded by the growth in revenue collections during the period.

The Development Budget Coordination Committee (DBCC) had earlier raised the government’s budget deficit ceiling to 2.7 percent of gross domestic product (GDP) this year and to 3 percent in 2017.

This deficit ceiling was raised to enable the government to spend big on infrastructure, human capital and social protection as part of President Duterte’s 10-point socioeconomic agenda to sustain high and inclusive growth.

During the month, the government’s total revenues grew 7 percent to P174.6 billion from P163 billion in October 2015. Of that amount, the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) collected P121.9 billion and P33.4 billion, respectively. The BIR posted a 5-percent growth in tax collection compared to P115.8 billion last year, while the BOC registered a 3-percent year-on-year increase in revenues in October from P32.5 billion.

Tax collection of other offices, meanwhile, posted a 98-percent jump in October to P2.3 billion from P1.1 billion. Non-tax revenues also improved by more than a quarter to P17.1 billion from P13.6 billion a year ago. Of that total, the Treasury’s income reached P4.9 billion, down 13 percent from P5.6 billion last year, while revenues of other offices jumped 53 percent to P12.3 billion from P8 billion.

According to National Treasurer Roberto Tan, the decline in the Treasury’s revenue was due to lower income from government deposits with the Bangko Sentral ng Pilipinas and lower dividends on the share of stocks from state-owned and -controlled corporations.

The government’s expenditures in October amounted to P177 billion, down by 7 percent year-on-year from P190 billion.

But setting aside the P16.1 billion in interest payments, the national government recorded a primary surplus of P13.7 billion in October, a reversal of the P10.9-billion primary deficit in the same month last year.

In the first 10 months of the year, however, the government’s budget deficit stood at P216 billion, up by more than 300 percent from P52.6 billion in the same period last year, but still well below the P388.87 billion ceiling for 2016.

At end-October, total government revenues increased by 3 percent to P1.82 trillion from P1.77 trillion a year before.

Government tax collection also improved by 8 percent to P1.629 trillion in the January-to-October period from P1.5 trillion in the same period last year. Of that amount, the BIR contributed P1.293 trillion, while the BOC raised P321.3 billion.

Tax collection of other offices likewise jumped by 9 percent to P15 billion at end-October from P13.8 billion in the same month last year.

Revenues generated by the Treasury, meanwhile, declined by 6 percent during the period to P91.1 billion, while other offices’ tax collection suffered a 39-percent drop to a combined P100.7 billion.

But netting out the one-off transfer of P62.5 billon in coconut levy assets in May last year, the government’s 10-month total non-tax and tax revenue collection growth reached 7 percent year-on-year.

Meanwhile, government expenditures in January to October accelerated by 12 percent to P2.04 trillion from P1.82 trillion in the same period last year.

Netting out interest payments, the government ended the first 10-month period with a P49.8-billion primary surplus, lower than the P219.3-billion primary surplus in the same period last year.