Government exceeds budget deficit cap on last-minute spending

MANILA, Philippines — The government incurred a fiscal deficit equivalent to 3.55 percent of gross domestic product (GDP) in 2019, exceeding the ceiling as government agencies made a last-minute push to accelerate their disbursements, the Bureau of the Treasury (BTr) reported yesterday.

According to the latest data from the national treasury, the government’ budget deficit amounted to P660.2 billion in 2019, 18.27 percent higher than the P558.3 billion deficit recorded in 2018.

This surpassed the government’s budget deficit ceiling of P620 billion for 2019, or 3.2 percent of GDP. The figure was also a revision from the previous budget deficit cap set by economic managers which was at P610 billion.

A deficit occurs when the government spends more than the revenues that it generates.

For December alone, the country’s deficit amounted to P251 billion, more than three times the P81 billion recorded in the same month of 2018.

According to the BTr, the high deficit in 2019 was driven by the strong spending performance of agencies.

Disbursements in 2019 grew by 11.42 percent to P3.8 trillion from P3.41 trillion in 2018. This marks the second consecutive year the government exceeded its spending program which was set at P3.77 trillion in 2019.

Productive spending (expenditures net of interest payments) reached P3.44 trillion, up by 12.34 percent from P3.06 trillion in 2018, while interest payments amounted to P360.9 billion, 3.34 percent higher than the P349.2 billion in the previous year.

“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 particular, disbursements in December jumped by 57.83 percent to P494.4 billion from P313.3 billion in the same month of 2018.

The BTr said this was driven by the robust infrastructure spending of the Department of Public Works and Highways, the implementation of social protection programs of the Department of Social Welfare and Development, personnel services expenditures, and the payment of pension and retirement benefits.

Meanwhile, Treasury data also showed that the government’s total revenues in 2019 rose by 10.08 percent to P3.14 trillion from P2.85 trillion in the previous year. This was, however, 0.39 percent short of the P3.15 trillion target.

As a result, the share of the government’s revenues to GDP settled at 16.86 percent, up from 16.36 percent in 2018 and the target of 16.51 percent.

The national treasury said the bulk, or 90 percent of the amount was accounted for by tax revenues at P2.83 trillion which is 10.21 percent higher than a year ago. This translated to a tax effort of 15.19 percent which is lower than the goal of 15.49 percent, but higher than the previous year’s level of 14.72 percent.

The remaining 10 percent came from non-tax sources, which also grew by 8.91 percent to P309.7 billion.

Revenues collected by the Bureau of Internal Revenue (BIR) grew by 11.46 percent to P2.18 trillion from 1.95 trillion in 2018.

“While percentage taxes grew significantly, the lower revenue from the excise tax on fuel and sugary drinks partly caused the lower-than-programmed collection of the agency,” the BTr said.

The Bureau of Customs (BOC), meanwhile, raised P630.3 billion in revenues last year which is 6.27 percent higher than the 2018 outturn of P593.1 billion. But this was lower than the agency’s target of P661 billion.

“The shortfall is mainly attributed to peso appreciation and lower importation,” the BTr said.

The BTr itself generated P146.5 billion in 2019, nearly double the program of P73.9 billion and 28.3 percent higher compared to the P114.2 billion recorded in 2018. Other offices also contributed P163.1 billion in revenues, down 4.1 percent year-on-year.

Net of interest payments, the national government incurred a P299.4 billion primary deficit for 2019, 43.21 percent higher than the primary deficit of P209 billion in 2018 and 35.81 percent above the P220.4 billion program.