Budget gap in August trimmed as government spending slows

MANILA, Philippines — The national government’s budget shortfall was trimmed in August as expenditures slowed down while tax collections improved. 

What's new

Data released by the Bureau of Treasury on Friday showed that the budget deficit narrowed 40.43% year-on-year to P72 billion in August. In the first eight months, the deficit amounted to P833 billion, 13.06% smaller compared with a year ago.

Why this matters

The deficit means the government continued to spend beyond its means, as authorities try to meet the country’s pandemic needs while revenues from tax and non-tax collections remain tepid due to anemic economic activity. To bridge the budget gap, the government would have to borrow money from creditors.

That said, the narrowing of budget deficit is a welcome development for a government that has been trying to temper the growth of debts that have piled up because of the pandemic.

What an analyst says

Nicholas Antonio Mapa, senior economist for ING Bank in Manila, attributed the contraction to the slowing government expenditures. 

“Budget deficit continues to slide but due partly to slower government spending. Meanwhile, although revenue collections increased, we’re noting that the outperformance is tagged to better than expected collections for the Bureau of Customs,” he said in a Viber message. 

Data broken down showed revenues expanded 28.23% year-on-year to P332.4 billion in August. Year-to-date, collections expanded 27.27% to P308.4 billion. 

Customs collections hit their fastest pace of growth for the year, recording 47.84% in August, as Mapa emphasized imports collections benefit from expensive fuel prices. 

Expenditures grew at a softer pace of 6.39% year-on-year to P404.5 billion due to higher “National Tax Allotment transfers and interest payments.” Government spending rose 8.02% on-year to P3.2 trillion in the first eight months. 

“All in all this means less support for growth momentum (national government spending down) while bir collections trail as spending falters on surging inflation,” Mapa said.