Budget deficit swells 28% in H1

MANILA, Philippines — The budget deficit ballooned by 28 percent to P716.1 billion in the first semester and is expected to widen further as government ramps up its spending for subsidizing state firms and preparing for the 2022 elections.

The Bureau of the Treasury yesterday said the fiscal deficit in the six months to June swelled to P716.1 billion, although this fell short of the P1.01 trillion projection set by the Cabinet-level Development Budget Coordination Committee (DBCC).

Revenue collections were sustained in the first semester, increasing by more than two percent to P1.49 trillion from P1.45 trillion, exceeding as well the DBCC forecast of P1.42 as the Bureaus of Internal Revenue (BIR) and Customs (BOC) posted improvements in their tax collections.

Taxes collected jumped by over 10 percent to P1.34 trillion as the BIR’s haul improved by roughly eight percent to P1.03 trillion. The BOC, for its part, raised its collection by 19.2 percent to P301.7 billion.

On the other hand, non-tax revenues dropped by more than 37 percent to P235.7 billion on double-digit declines in the performance of the Treasury and other offices. The Treasury, which contributes over half of non-tax income, saw its revenues crash by 55.45 percent to P81.6 billion.

Also, the government increased its expenditures by nearly 10 percent to P2.2 trillion in the first semester from P2.01 trillion during the same period last year.

Despite this, the government missed its spending target of P2.43 trillion for the first half as it has yet to release subsidies for state-owned firms and payments for contractors and suppliers.

“This is mainly due to the timing of subsidy releases awaiting requests from concerned GOCCs, the pending enactment of the GUIDE bill, outstanding checks as of end-June which are yet to be encashed by contractors or suppliers of line agencies, as well as interest savings,” the Treasury said.

In June, the government swung back to a budget deficit of P149.9 billion from a surplus of P1.8 billion during the same month last year. For the period, revenues declined by over 30 percent to P245.6 billion as the BIR kept its deadline for the filing of income tax return in April, unlike in 2020 when it extended the payment schedule to June.

Whereas revenues went down, expenditures surged by more than 13 percent to P395.4 billion. The Treasury attributed this to spending made for public works, military modernization, repatriation of overseas Filipino workers, free tertiary education and preparations for the 2022 elections.

ING Bank senior economist Nicholas Mapa warned that the economy may incur a debt-to-GDP ratio above the international recommendation of 60 percent by the end of 2021 as the fiscal deficit of P716.1 billion accounts for around eight percent of the gross domestic product.

“With the deficit widening, it is getting more difficult to avoid having debt-to-GDP [ratio of] above 60 percent for 2021 and beyond,” Mapa said.

The DBCC in May raised its budget deficit projections to 9.4 percent of GDP this year, then 7.7 percent next year, 6.4 percent in 2023 and 5.4 percent in 2024.

Likewise, the DBCC anticipates revenue to reach P2.88 trillion and expenditures to amount to P4.74 trillion. Economic managers said the country’s spending is seen to bloat in 2021, as the government imports vaccines in a bid to achieve herd immunity by December.