Gov’t nearly balanced budget as it spent less in July
The government failed to sustain the rise in spending in July, fueling concerns over the state’s ability to boost growth amid climbing interest rates and rising consumer prices.
Data released on Friday showed that the government nearly balanced its budget in July as the state failed to take advantage of surging revenue, spending less than it intended.
This follows the release of data earlier this week that showed government spending failed to contribute to economic growth in the second quarter of the year despite hopes that public infrastructure projects could provide a boost to output.
“We’d rather see (bigger) budget deficits at this point in time… They are unable to provide the type of lift we need now that the economy is facing headwinds,” Bank of the Philippine Islands (BPI) economist Nicholas Mapa said in an interview.
Treasury data on Friday showed that the country’s budget deficit shrank to P1.8 billion in July, down 97 percent year-on-year. This came as revenue rose by 15 percent, while spending fell 15 percent.
In the seven months to July, the country’s deficit totaled P55.7 billion, lower than last year’s P104.5 billion. Net of interest payments, the state posted a primary surplus of P46.5 billion.
Government spending is seen to be one of the main drivers of economic growth this year, particularly due to the size of the infrastructure package in the 2014 budget.
The state said it planned to spend P404.3 billion on new roads, bridges, and other infrastructure projects this year. This is higher than the budget of 2013, and the equivalent of 3.1 percent of gross domestic product (GDP).
By 2016, government spending is seen to reach the equivalent of 5 percent of GDP, more than double the 1.8 percent spent in 2010.
The International Monetary Fund (IMF) last month said the state’s growth targets for the economy remained “contingent” on the government’s capacity to spend.
In the second quarter of the year, the economy grew by 6.4 percent, better than the first quarter’s 5.7 percent.
For the whole year, the government’s growth target has been set at 6.5 to 7.5 percent.
Officials earlier blamed the government’s inability to stick to its spending program on administrative bottlenecks at smaller agencies, which have found it difficult to use the money disbursed to them.
But Finance Secretary Cesar Purisima was still optimistic, despite the spending slump, as he focused instead on the state’s revenue growth, which he said was a result of reforms at the bureaus of Internal Revenue (BIR) and Customs (BOC).
Year-to-date, collections rose by 12 percent year-on-year.
“We have maintained this trend of faster revenue growth than nominal GDP growth since 2011,” Purisima said in a statement. He credited the nearly-balanced budget to “efficient collection of tax revenue.”
BPI’s Mapa, for his part, urged authorities to accelerate disbursements and address issues that make it harder to spend.
“Now that they have the money, they should be spending it. No other government has had the kind of fiscal space we have now,” Mapa said. Paolo G. Montecillo
