Budget surplus widens in January as revenues surge

By Melissa Luz T. Lopez, Senior Reporter

THE government posted a wider budget surplus in January, the Bureau of the Treasury reported Friday, as revenues surged to outpace public spending on the back of tax reform.

The country’s budget balance logged a P10.2-billion surplus as the year opened, nearly five times wider than the P2.2-billion surfeit posted in January 2017.

Revenues jumped by 19% year-on-year to reach P238.9 billion from P200.3 billion, as both tax and non-tax collections posted double-digit increases.

“The growth was mainly driven by the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) which took effect on January 1, 2018,” the Treasury said in a statement.

The Bureau of Internal Revenue collected P175.6 billion for the month, nearly a fifth higher than the P147.4 billion raised the previous year. The Bureau of Customs also generated more funds worth P40.8 billion, up 14% from P35.9 billion during the comparable year-ago period.

Collections by these bureaus reportedly surged further in February to beat monthly targets, according to preliminary data from the Department of Finance.

TRAIN reduced personal income tax rates but has been offset by the removal of some value-added tax breaks; higher fuel, automobile, mineral and coal excise tax rates, as well as new levies on sugar-sweetened drinks and cosmetic surgery.

Meanwhile, non-tax revenues from other government agencies likewise surged to P21.1 billion, more than a third higher than the P15.7 billion collected previously.

Funds collected by the Treasury were flat at P8.1 billion, drawn from higher incomes from state deposits coupled with dividend payments made by state-run firms.

The bureau said service incomes remitted by the Philippine Amusement and Gaming Corp. and the Manila International Airport Authority added to state revenues and helped offset lower gains from the bond sinking fund.

Meanwhile, government spending also climbed to P228.7 billion, up 15% from P198.1 billion the previous year. Of the amount, P43.5 billion was spent on interest payments for outstanding debts.

“Ramped up infrastructure spending as well as the implementation of the third tranche of compensation adjustment for government employees contributed to the month’s performance,” the Treasury added.

January saw a fresh increase in wages for public sector employees as provided under Executive Order 201 signed by then-President Benigno S.C. Aquino III in 2016.

The Duterte administration intends to spend P1.068 trillion for public infrastructure this year, equivalent to 6.1% of gross domestic product (GDP). This forms part of an P8-9 trillion program for big-ticket projects until 2022, which is expected to boost economic growth while also generating more jobs and improving the ease of doing business in the Philippines.

Two analysts said January’s surplus may be temporary, but noted that faster growth largely depends on the implementation of big-ticket construction projects.

“January’s fiscal surplus is expected because of TRAIN. Usually, the fiscal gap during the first month of the year is relatively small. But I expect a fiscal deficit for February and in subsequent months similar to past experience and despite TRAIN’s additional revenue contribution,” Security Bank Corp. economist Angelo B. Taningco said when sought for comment.

“I assume that the government’s Build, Build, Build program will become more active this year in terms of boosting public infrastructure spending.”

Mr. Taningco said the government’s 7-8% growth goal is attainable, even as he is pencilling in a 6.8% forecast for 2018 given “stronger” downside risks stemming from the bureaucracy’s absorptive capacity which could hamper public spending.

“The expenditure report in January 2018 suggests that government spending is on track to contributing more to economic growth this year, aligned with the promises of the current administration,” Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines, said separately.

“[I]f government spending grows steadily at double-digit pace then GDP growth for first three months of 2018 might exceed the 6.4% economic expansion recorded in the same period a year ago.”