Budget deficit tracks 6-year high

MANILA, Philippines - The Duterte administration’s budget deficit is on track to hit the highest level in six years on the back of higher infrastructure spending and lower revenue, latest data showed.

As of September, the deficit accounted for 2.1 percent of gross domestic product (GDP), much wider than the 0.27 percent recorded in the same period a year ago.

For this year, the government aims to cap the deficit at 2.7 percent of GDP, which if realized, will be the widest since 2010.

Budget Secretary Benjamin Diokno said this would be driven by an acceleration in expenditure after the previous government suffered bottlenecks that led to underspending.

From January to September, spending accounted for 18 percent of GDP, up nearly a percentage point from 17.1 percent last year.

Broken down, infrastructure accounted for 4.2 percent of economic output, surging from just 3.3 percent a year ago. The target for the year is five percent.

But the wider deficit was not only driven by a boost in spending, but also a decline in revenues during the same period.

For the first nine months, the country’s  revenue-to-GDP  ratio declined to 15.9 percent from 16.8 percent.

Broken down, tax effort was steady at 14.2 percent after the Bureaus of Internal Revenue (BIR) and Customs maintained their performance.

BIR collections accounted for 11.3 percent of GDP, while those from Customs reached 2.8 percent, similar from last year.

The government is planning a comprehensive tax reform program, which could initially lead to some revenue losses before an estimated increase of about P200 billion in the first package. Five tax reform packages are being prepared for approval in Congress.