Budget deficit narrows in February

 Budget deficit narrows in February

A worker assembles a pole at a construction site in Quezon City, May 23, 2018. — REUTERS

THE NATIONAL Government’s budget deficit narrowed to P105.8 billion in February, as spending and revenue collections slumped, the Bureau of the Treasury (BTr) reported.

The BTr’s cash operations report showed the fiscal gap declined by 8.77% in February, from P116 billion in the same month in 2021.

Month on month, the fiscal gap widened from the P23.4-billion deficit in January.

In February, government expenditures stood at P318.2 billion, falling by 5.16% from P335.5 billion in the same month in 2021 when the P45-billion equity infusion to government financial institutions (GFIs) was completed.

Excluding the equity infusion, the BTr said spending rose by 9.64% year on year “largely attributed to the national tax allotment (NTA) of the local government units (LGUs), spending for the different programs of the Department of Education (DepEd), Commission on Elections (Comelec), and COVID-19 (coronavirus disease 2019) vaccine financing under the Department of Health (DoH).”

Starting this year, LGUs are given a bigger share in tax collections through the NTA, alongside the transfer of basic services.

Interest payments also fell by 9.42% to P28.2 billion. Primary expenditures or spending net of interest payments dropped by 4.73% to P290 billion.

Meanwhile, revenue collection contracted by 3.26% year on year to P212.40 billion in February, as tax revenues slipped by 2.69% to P197.8 billion and nontax revenues fell by 10.37% to P14.6 billion.

Collections of the Bureau of Internal Revenue (BIR) dropped by 11.38% to P136.6 billion during the month, while Bureau of Customs (BoC) saw a 25.96% increase in collections to P59.4 billion.

The BTr attributed the BoC’s February performance to “improved valuation and continued intensified collection efforts.”

The Treasury posted a P4.22-billion income, down by 7.37% year on year, due to the lower dividend remittances from state firms, guarantee fees and income from National Government deposits.

TWO-MONTH PERFORMANCEFor the first two months of 2022, the budget deficit narrowed slightly to P129.2 billion from P130 billion a year ago.

Total revenues jumped by 2.12% to P490.5 billion, slightly outpacing the 1.53% growth in expenditures.

As of end-February, tax collections increased by 4.32% to P453.1 billion, thanks to a 24.69% rise in BoC collections to P117.8 billion. BIR collections dipped by 1.16% to P332.4 billion.

Nontax revenues fell by 18.71% to P37.4 billion, as income from the BTr plunged by 35% to P15.1 billion due to lower dividends on shares held by the government.

Year-to-date expenditures went down by 1.53% to P619.7 billion, while interest payments increased by 19.94% to P93.8 billion.

“Unless revenue collection can pick up considerably, we may have to expect further deterioration for both the nation’s deficit and overall debt levels.” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a Viber message.

Mr. Mapa said a spending slowdown will likely be seen ahead of the May elections, “given the ban on hiring and capital expenditure during the campaign season.”

“This is on top of the reluctance from officials to spend to limit the hit on the deficit and overall debt levels. However, the need to support the economy by way of subsidies will force fiscal managers to cough up additional expenses to help Filipinos through such challenging times,” he said.

The election ban on public works started on March 25 and will run until May 8. The law, which also prohibits social welfare dole-outs, seeks to prevent politicians from using state resources for their election campaign.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said tax collection may improve in the next few months due to looser mobility restrictions, reduced spending on the pandemic response, and increased business activity.

“Thus, these measures would help narrow the country’s budget deficit and also help temper the growth in the government’s debt stock,” he said via Viber.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the decline in spending may have come from the “continuing ‘normalization’ of spending from the unusual kind of spending due to the pandemic response by the government, and this will be observed as the country comes out of the pandemic crisis.”

The government has set a budget deficit ceiling of P1.65 trillion for 2022, which is equivalent to 7.7% of gross domestic product.

The government runs on a budget deficit when it spends more than it makes to fund programs that support economic growth. It borrows from foreign and local sources to plug the gap. — T.J.Tomas