August 26, 2022

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NG budget deficit narrows in July

by Diego Gabriel C. Robles

The National Government’s budget deficit narrowed in July, as government revenues grew by double-digits, the Bureau of the Treasury (BTr) reported on Friday, with economists attributing this to the uptick in business activity as pandemic restrictions continued to ease.

In a statement, the BTr said the budget gap stood at P86.8 billion in July, 28.41% lower than the P121.2 billion in the same month a year ago.

Government expenditures rose by 4.81% to P395.4 billion during the month, “partly due to the release of PhilHealth subsidy and higher National Tax Allocation (NTA) transfers.”
On the other hand, total revenue collection jumped by 20.53% to P308.6 billion in July from P256.1 billion in the same period last year. This was driven by a 22.24% rise in tax revenues to P281.9 billion, and a 4.96% increase in nontax revenues to P26.7 billion.

The bulk of tax revenues came from the Bureau of Internal Revenue (BIR) with P197.4 billion, up by 15.55% year on year.

“BIR’s higher uptake is attributable to its continued strict enforcement, as well as the implementation of its digitization program,” the BTr said.

Collections by the Bureau of Customs (BoC) surged 46.23% to P83.6 billion, which the BTr attributed to “improved valuation, digitized and modernized systems, and the gradual reopening of the economy which resulted in higher import volume.”

At the same time, nontax revenues from the BTr dipped 1.67% to P13.4 billion, due to lower dividend remittances and interest income from government deposits, though partially offset by higher income from Bond Sinking Fund (BSF) investments and the share of the National Government from the income of the Philippine Amusement and Gaming Corporation (PAGCOR).

Primary expenditures, or spending net of interest payments, expanded by 7.88% to P343.3 billion in July.

Interest payments declined by 11.75% to P52.1 billion in July, “due in part to the level effect of the timing of coupon payments for Global Bonds recorded in July last year as it originally fell on a weekend (Aug. 1, 2021).”

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion attributed the narrowing of the budget gap to higher revenue collections as the economy continued to reopen.

“Nevertheless, this continues to show the results of the re-opening economy with domestic demand expected to further pick-up (though slightly still because of inflation pressures) due to the resumption of face-to-face classes,” he said in a Viber message.

“(This) may have an impact on consumer spending and putting stronger upside to more business activity, thus, potentially more opportunities for higher government revenues moving forward,” he added.

7-MONTH BUDGET GAP
In the first seven months of 2022, the budget deficit narrowed to P761 billion, 9.11% lower than the P837.3-billion gap a year ago.

Total revenue collection by the National Government jumped by 16.59% to P2.036 trillion in the seven months leading to July from P1.746 trillion in the same period last year.

Tax revenues, which accounted for 90% of the total, jumped 15.82% to P1.823 trillion during the seven-month period. This was driven by the 10.59% increase in BIR collections to P1.329 trillion, and 33.82% rise in BoC collections to P480.3 billion.

Nontax revenues, on the other hand, went up by 23.61% to P213.1 billion, thanks to a 23.36% rise in BTr revenues to P117.5 billion.

“The narrower budget deficit from January to July may have to do with the further re-opening and no more large scale lockdowns so far this year, compared to some pockets of hard lockdowns in 2021, thereby increasing the government’s tax revenue collections with more business and industries re-opening and operating at much higher capacity,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

On the other hand, year-to-date expenditures rose by 8.26% to P2.797 trillion from P2.583 trillion in the same period last year.

Primary expenditures stood at P2.487 trillion from January to July, up by 7.41% year on year.

Interest payments increased 15.6% to P309.3 billion, “but still lower by 3.17% versus the P319.4 billion original program, translating to P10.1 billion in savings.”

“Interest payments comprised 11.06% of total expenditures for the 7-month period, up from 10.36% in 2021. Meanwhile, interest payments as a percentage of revenue improved to 15.19% from last year’s 15.32%,” the BTr said.

The government expects the budget deficit to hit P1.65 trillion this year, slightly lower than the actual deficit of P1.67 trillion in 2021.

As of the first quarter, the budget deficit as a ratio of the gross domestic product (GDP) stood at 6.4%.

The government aims to reduce the deficit to 7.6% of GDP this year, and further to 6.1% in 2023, 5.1% in 2024, 4.1% in 2025, 3.5% in 2026, 3.2% in 2027, and 3% in 2028.