1000 peso bills

By Melissa Luz T. Lopez, Senior Reporter
THE GOVERNMENT breached its deficit limit in 2018, as state spending shot past target to outpace the increase in revenue collections.
Unofficial data secured by reporters showed the budget balance at a P558.259-billion deficit last year, substantially bigger than the P350.637-billion shortfall in 2017 and past the P526.8 billion programmed for the entire year.
The wider fiscal gap came as state disbursements reached P3.408 trillion, bigger than the P3.346-trillion target for the year and marking a 20.7% increase from the P2.824 trillion spent in 2017.
Economic growth settled at a three-year low of 6.2% in 2018 despite the hefty spending, with officials pinning the blame on elevated inflation.
Meanwhile, revenues totaled some P2.85 trillion, higher than the P2.82-trillion goal for the year. The amount was 15.2% more than 2017’s P2.473 trillion, fueled by implementation of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN).
The TRAIN was expected to generate an additional P63.3 billion revenues during its first year of implementation from the removal of some exemptions to value-added tax (VAT); increased tax rates for fuel, cars, tobacco, coal, minerals, documentary stamps; and new taxes for sugar-sweetened drinks and cosmetic procedures, to name a few.
However, December saw a wider P81.042-billion gap, the biggest since September, as state spending totalled P313.251 billion, down by 5.1% year-on-year, versus a P232.209-billion revenue haul, data showed.
As a developing economy, the Philippines operates on a budget deficit as it spends more than what it earns to support hefty funding needs for infrastructure development and social services.
This also meant that the deficit ceiling set at three percent of gross domestic product (GDP) may have been breached.
Michael L. Ricafort, economist at the Rizal Commercial Banking Corp., pegged the amount as equal to 3.2% of GDP. That compares to the 2.2% fiscal shortfall in 2017 and appears to be the widest since 2010.
Mr. Ricafort said the wider-than-programmed deficit is not a cause for concern just yet.
“Exceeding the said target may be justified by increased government spending on major infrastructure projects that may have future benefits in terms of further development and improved productivity in the economy in the long run,” he said.
Budget Secretary Benjamin E. Diokno said in January that the 2018 deficit ceiling was likely breached to settle at 3.1% of GDP amid brisk state spending.
The administration of President Rodrigo R. Duterte has programmed an even wider deficit this year at P624.4 billion — equivalent to 3.2% of GDP — to accommodate bigger provisions for infrastructure projects.
This should spur growth to 7-8%, with the state also counting on a one-time boost from election-related expenses.