In a bid to supercharge economic growth, the Duterte administration plans to spend trillions of pesos to upgrade the country’s outdated roads, ports and railways through the ambitious program called “Build, Build, Build”.
The STAR/Michael Varcas, file
Catch-up spending plan pays off, pushes deficit beyond cap
Ian Nicolas Cigaral ( - February 27, 2020 - 3:24pm

MANILA, Philippines — The Duterte administration’s catch-up plan paid off at the last-minute, pushing up expenditures to exceed government program and the deficit cap to be breached for the second straight year.

According to a report from the Bureau of the Treasury on Thursday, the budget deficit widened 18.3% year-on-year to P660.2 billion, falling above the government’s P620-billion cap for the year.

The budget gap was equivalent to 3.55% of gross domestic product (GDP), breaching the 3.2% limit.

A deficit indicates the amount of spending surpassed revenues generated for the period. While around a decade ago a wider deficit would have been bad news, last year’s results were welcomed by both government and analysts who see higher spending as a potential offset to the impact of the coronavirus.

“Expenditures sped up despite the delay in the approval of the 2019 budget as line agencies caught up with spending towards the latter part of the year,” the Treasury said in a statement.

Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said in a text message: “If we do have an outbreak locally, the government has to make adjustments and that may mean a fiscal stimulus to support economic growth in 2020.”

Last year marked the second consecutive year the deficit cap was breached as the Duterte government pursued its high spending plans. In 2018, deficit hit 3.2% of GDP, beating the 3% cap at the time.

Last hurrah for spending

From Thursday’s report, data showed disbursements went up 11.4% year-on-year to P3.8 trillion, surpassing the P3.4-trillion program. Removing interest payments, “productive disbursements” by agencies hit P3.44 trillion, up 12.3% annually.

The year-end tally was largely aided by a December push. Expenditures at the last month of the year grew 57.8% year-on-year to P494.4 billion, figures showed.

On the flip side, the government collected P3.14 trillion by end-2019, up a little more than a tenth year-on-year. In December alone, revenues reached P243.3 billion, 4.77% higher than same period in 2018. 

“The December spending uptick was expected. We know that the government has been on a catch-up spending plan due to its failure to pass the 2019 national budget on time,” Asuncion said.

“Although total revenue was growing (which is good news), government must be prudent and careful about budget deficits and being able to do what was set to be done,” he added.

For this year until 2022, policymakers kept the budget deficit limit at 3.2% of GDP, although Asuncion believes this is again likely to be breached as the government pump-prime the economy and spend more.

GDP growth has slowed for the past three years under Duterte, falling to an eight-year low of 5.9% in 2019 due to project implementation delays because of lack of new budget. GDP growth is targeted higher, at 6.5%-7.5% until 2022, albeit lower than the original goal of 7%-8%.

“Also note that the (Department of Finance) has sounded the inability to collect certain taxes because of the immediate impact of the COVID-19 outbreak in China that has clearly affected tourism receipts and other tourism-related businesses,” Asuncion said.

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