MANILA, Philippines — The government reverted to a fiscal deficit in May, after posting a P42.7-billion surplus in April, amid higher public spending fueled by accelerating inflation and a high-interest environment.
The April surplus was attributed to the seasonal uptick in revenues during the income tax filing month.
Data from the Bureau of the Treasury released on Thursday showed that the Marcos administration had recorded a budget deficit of P174.9 billion in May, up 43.10 percent from last year.
For the first five months of the year, the budget deficit widened to P404.8 billion, rising by 24.06 percent from P326.3 billion in the same period last year.
A budget deficit happens when the state’s expenses exceed its revenue.
READ: Gov’t back to fiscal surplus in April
Broken down, the tax take of the Bureau of Internal Revenue (BIR), which historically accounts for 80 percent of state revenues, increased by 2.79 percent to P219.2 billion in May buoyed by higher collections of value-added tax, net income and profit taxes, and miscellaneous tax.
Since the beginning of the year, the BIR has raised P1.2 trillion, up by 12.81 percent.
READ: BIR, Customs collections rose in April
Meanwhile, the Bureau of Customs has collected P81.3 billion from imported goods. This was an increase of 4.33 percent. Year to date, it rose by 6 percent to P380.9 billion.
Government spending in May amounted to P557 billion, accelerating by 22.24 percent mainly driven by allotments to government agencies’ projects and budgetary support to local government units and state-run corporations. For the first five months, disbursement reached P2.3 trillion, up by 17.65 percent.
Primary spending — which refers to total expenditures minus interest payments — went up by 40.71 percent to P113.8 billion in May.
Gov’t spending accelerates
The wider budget deficit for the month and year-to-date was due to a faster increase in government spending, higher prices that bloated expenditures, and higher interest rates that increased borrowing costs, Rizal Commercial Banking Corp. economist Michael Ricafort said in a Viber message.
At some point, if inflation eases further, there could be some need for higher taxes and new taxes as a final option, Ricafort added.
Looking back, Finance Secretary Ralph Recto said that there will be no new taxes during the remaining years of the Marcos administration, instead the government will continue to boost revenue collection.
READ: No new taxes, just better collection – Recto
Inflation in May slightly quickened by 3.9 percent from 3.8 percent in April buoyed by higher prices of food items and transportation.
Meanwhile, the Monetary Board has kept its benchmark rate steady at a 17-year high of 6.5 percent, following cumulative hikes of 450 bps to bring down inflation.
The Marcos administration increased its borrowing plan for the third quarter to P630 billion, from the P585 billion in the previous quarter as the government raises funds to aid its budget deficit and projects.
For this year, the government has set a budget deficit ceiling of P1.48 trillion, or equivalent to 5.6 percent of gross domestic product (GDP). It also aims to reduce the deficit-to-GDP ratio to 3.7 percent by 2028.