Budget deficit inches up in March

THE government’s budget deficit inched up in March as expenditures outpaced revenues, but the first-quarter gap narrowed due to slower spending due to the coronavirus disease 2019 (COVID-19) pandemic, the Bureau of the Treasury (BTr) reported on Monday.

Data from the BTr showed the country’s budget deficit went up 1.83% to P59.5 billion in March from the P58.4 billion recorded a year ago. This is also higher than the P37.6-billion gap logged in February.

Government spending increased by 15.97% to P333.2 billion in March from P287.3 billion in the same month last year, with 87% of the total or P290.1 billion going to primary spending and the remaining P43.1 billion to interest payments, which went up 17.96% due to the coupon payment of five-year retail Treasury bonds issued last year.

Primary expenditures, or spending net of interest payments, increased by 15.68% that month from P250.8 billion a year ago.

The BTr said the jump was largely due to disbursements for the first tranche of the government’s salary hike program as well as “maintenance expenses of agencies and release of the block grant to the Bangsamoro Autonomous Region for the month of March.”

Meanwhile, state revenues increased 19.58% to P273.7 billion in March from P228.9 billion a year ago, with non-tax revenues surging 215.41% to P96.6 billion, offsetting the 10.67% drop in the government’s tax haul which settled at P177.1 billion.

Of the total tax revenues, collections by the Bureau of Internal Revenue (BIR) dropped 10.67% to P131.7 billion in March as the enhanced community quarantine (ECQ) forced businesses to temporarily halt operations.

The BTr said the Bureau of Customs (BoC) collections dropped by 9.43% to P44.6 billion that month “due to slower economic activity caused by the pandemic and ECQ measures.”

Revenues generated by other tax-collecting bodies also plunged 49.09% year on year, collecting just P800 million in March.

On the other hand, non-tax revenues surged 215.41% to P96.6 billion in March after BTr’s income surged 539% to P77 billion from P12 billion previously and as income from other offices also went up 5.6% to P19.6 billion.

“The huge increase for the month was driven by early dividend remittance and higher collection of interest on advances to GOCCs (government-owned and -controlled corporation) as well as income from BSF (bond sinking fund) investments,” the Treasury said.

SPENDING SHORTFALL
Year to date, the government’s budget deficit narrowed by 17.97% to P74 billion in the first quarter from the P90.2 billion recorded in the same period last year. This was 77.76% below the P332.9-billion deficit ceiling programmed for the period.

The Treasury said the budget deficit relative to the country’s gross domestic product (GDP) was at 1.65% last quarter, down from the 2.04% ratio seen in the comparable year-ago period. The government sees the fiscal deficit hitting 5.3% of GDP this year.

Overall disbursements increased 9.16% to P849.2 billion in the quarter but was still 14.48% short of the P993-billion target for the period.

The BTr said the spending shortfall was largely due to the delayed implementation of state programs after the ECQ was implemented in Luzon in mid-March.

It noted “lower-than-programmed interest payments and net lending” also drove expenditures to fall short of the target.

As a percentage of GDP, government spending improved to 18.98% in the first quarter from 17.59% a year prior.

Of the total expenditures for the period, primary spending increased 8.82% year on year to P729.3 billion but was 14.62% lower than the P854.2 billion programmed for those three months.

Interest payments also went up 11.24% to P119.9 billion — also 13.61% short of P138.8-billion target — generating P18.9 billion in savings for the government, according to the Treasury.

Interest payments made up 12.94% of total expenditures in March and 14.12% in the first quarter, higher than the 12.72% and 13.85% levels logged last year, respectively.

Meanwhile, interest payments accounted for 15.75% of total revenues in March and 15.46% in the first quarter, down from 15.7% and 15.67% a year prior.

On the other hand, government revenues in the first quarter increased 12.72% year on year to P775.2 billion, breaching the P660.1-billion target for those three months.

Despite the March slump, the state’s total tax take still inched up by 0.78% in the first quarter to P620.8 billion, also surpassing the P610.3-billion target for the period.

Of this total, BIR collections made up P468.8 billion, up 0.12% year on year and past the P454-billion goal for the period, while the BoC generated P145.3 billion, 2.43% higher from a year ago but 3.16% short of its P150-billion target.

Other state offices also collected higher taxes worth P6.7 billion, up 13.1% year on year and exceeding the P6.3-billion goal.

Non-tax revenues, meanwhile, more than doubled in the first quarter to P154.4 billion and well above the P49.8-billion goal set for the period.

Of this total, the BTr’s income surged 260.67% year on year to P111.2 billion to exceed the P19.8-billion target for the quarter, while revenues from other non-tax collecting offices also improved 5.59% to P43.3 billion compared to the year-ago figure, better than the P30-billion goal.

The government’s revenue effort improved to 17.33% in the first quarter from 15.55% a year ago, but tax effort in those three months slipped to 13.88% from 13.93% in the same period last year.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the higher budget deficit in March showed the “inability of the government to collect revenue more than its ability to hit spending targets.”

“I think the ECQ stoppage and anxiety beginning in March may have forced some delays in expenditure and we can only expect more of the same for 2Q with government unable to collect and at the same time hit spending targets given the lockdown,” Mr. Mapa said in an e-mail.

He said while a lower deficit may “look great on paper as the Philippines maintains its fiscal integrity…, at this point in time, what may be needed more is expedited expenditure to offset the huge hole left in our GDP growth engine.”

While a narrower budget deficit “is always good,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said via e-mail that the government should brace for a steep decline in revenues this quarter due to the ECQ.

Preliminary data showed the government’s tax haul plunged 84% to P40.47 billion in the first 15 days of April from the P260.45 billion collected during the same period in 2019, also 87.16% short of the P315.95-billion target. The decline was largely due to deferred payments of 2019 income tax and other returns when deadlines have been extended for four times. — B.M. Laforga