Deficit-to-GDP ratio in 2018 breached

MANILA, Philippines — The national government’s fiscal deficit as a percentage of the country’s gross domestic product (GDP) reached 3.2 percent in 2018, exceeding the three percent ceiling set by economic managers for the period, the Bureau of the Treasury (BTr) said yesterday.

In a statement, the Treasury said the national government’s fiscal position registered a deficit of P558.3 billion in 2018, wider than the P523.7 billion original cap set by economic managers.

The BTr said this is equivalent to 3.2 percent of the country’s GDP, above the three percent deficit-to-GDP ceiling and wider than the 2.2 percent ratio recorded in the previous year.

Despite this, Finance Secretary Carlos Dominguez said the country’s deficit-to-GDP ratio remains “manageable.”

A deficit happens when government spending exceeds the revenues it generated.

According to BTr data, the country’s revenues last year amounted to P2.85 trillion, slightly breaching the P2.846 trillion program.

This translated to a revenue effort of 16.4 percent, higher than the 15.6 percent level recorded a year before and the 16.3 percent target.

In particular, the government’s tax collections in 2018 increased by 14 percent to P2.56 trillion from P2.25 trillion in 2017, but fell behind the P2.68 trillion tax revenue program. 

As a result, tax collections as a share of GDP improved to 14.7 percent—the highest in 20 years—from 14.2 percent in the previous year. However, it fell below the 15.4 percent program.

Broken down, P1.95 trillion of the total tax revenues of the government was collected by the Bureau of Internal Revenue (BIR).

While this was 10 percent higher than the end-2017 level of P1.77 trillion, this was six percent or P121.9 billion behind the agency’s P2.073 trillion target.

“The shortfall may be partly attributed to non-implementation of fuel-marking and the slowdown in consumption amid high inflation and peso depreciation,” the BTr said.

On the other hand, the Bureau of Customs’s full year collections climbed by 29 percent year-on-year to P593.1 billion, surpassing the bureau’s P581.3 billion target by two percent.

“Revenue enhancement measures coupled with proper valuation and tariff classification of goods, as well as a strengthened campaign against illegal trade and the windfall from peso depreciation, contributed to the strong BOC performance,” the Treasury said.

Likewise, government’s non-tax revenues last year rose by 28 percent to P284.3 billion from P222.5 billion, and surpassed the P168.8 program by 68 percent.

About P114.2 billion of the amount was generated by the BTr, P58.4 billion above program. The increase was on account of higher dividends from national government shares of stocks amounting to P40.8 billion (four times higher than the P10 billion program) and the national government share from Philippine Amusement and Gaming Corp.’s income amounting to P31.8 billion.

Meanwhile, government disbursements last year totaled P3.408 trillion, one percent above the P3.37 trillion spending program of the government.

“As a result of ramped-up spending in public infrastructure, social protection, and higher Personnel Services (PS) due to the pay increase for both the civilian, and military and uniformed personnel, as well as the improved fill up rates for teaching positions in the DepEd disbursements surged by 21 percent from last year’s level,” the BTr said.