Deficit to GDP in H1 falls below target

MANILA, Philippines — The national government’s fiscal deficit in the first half reached 2.34 percent of the country’s gross domestic product (GDP), the Department of Finance (DOF) said over the weekend.

In a report, Finance Undersecretary Gil Beltran said the government’s fiscal deficit in the first semester was below the three percent of GDP target.

This came as the share of the government’s expenditures to GDP reached 19.47 percent, outpacing revenue effort, which settled at 17.12 percent.

A deficit occurs when government expenditures exceed the revenues it generates.

In the first six months, the fiscal deficit widened to P193 billion from P154.5 billion recorded in the same period last year. However, it still fell short of the P264.3 billion ceiling set by economic managers for the period.

Economic growth in the second quarter slowed down to six percent from the first quarter growth of 6.6 percent and the second quarter 2017 figure of 6.6 percent.

This puts the average GDP growth in the first six months to 6.3 percent, below the government’s seven to eight percent target range.

Meanwhile, revenue in the first half amounted to P1.41 trillion, 19.9 percent higher than the P1.18 trillion posted in the same period in 2017.

As a result, revenue effort in the first half rose by 1.47 percentage points to 17.12 percent from the 15.65 percent a year before. The DOF said this was the highest ever first semester revenue effort ever achieved by the government.

Tax effort, alone, climbed 1.01 percentage point to 15.23 percent from 14.22 percent, similarly the highest first semester tax effort ever.

Beltran said 0.4 percentage point of the increase in tax effort was due to the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, while the remaining 0.61 percentage point is attributed to improvements in tax administration.

Disbursements, for its part, also rose by 20.5 percent to P1.6 trillion from last year’s level of P1.33 trillion.

This corresponds to 19.47 percent of GDP, 1.77 percentage points higher than the 17.7 percent posted in the same period in 2017. This was also the highest expenditure effort recorded since the first half of 2003.

According to the DOF, higher revenues led to higher expenditures during the period, which then propelled economic growth.

“Fiscal space expanded by TRAIN 1 and tax administration enabled the government to boost investments and growth in the first semester,” Beltran said.

He said capital outlays, which jumped 42.4 percent, boosted GDP growth by almost a percentage point, while government current expenditures, which grew 26.6 percent, contributed 1.16 percentage points to economic growth.

“Strong macroeconomic fundamentals backed by tax reforms and the Build Build Build program will continue to boost economic growth as the competitiveness of the economy rises and more jobs are created,” Beltran said.