Budget deficit eases to 6-month low

By Jenina P. Ibañez, Senior Reporter

THE budget deficit eased to a six-month low in October even as it widened year on year, the Bureau of the Treasury (BTr) reported.

Preliminary data from the BTr showed the fiscal gap stood at P64.3 billion in October, or 4.77% higher than a year ago. This was 64.46% lower than the P180.9-billion deficit in September and was the lowest since the P44.4-billion gap in April.

Government spending jumped by 9.60% to P317.4 billion in October from a year earlier, but was lower than the P412.4 billion in September.

“Ninety percent or P285.8 billion of the total disbursements for the month was for primary expenditures, which posted 6.86% or P18.3-billion growth for the month,” the Treasury said in a statement.

Primary spending refers to total expenditures minus interest payments. Interest payments grew by 42.89% to 31.5 billion in October.

Meanwhile, state revenues jumped by 10.9% to P253.1 billion in October. Accounting for 87% of the total, tax revenues went up by 7.21% to P219.1 billion year on year.

Broken down, collections from Bureau of Internal Revenue (BIR) rose by 6.60% to P162.1 billion, while the Bureau of Customs (BoC) collections increased by 9.76% to P55.5 billion.

Other tax collecting offices generated P1.4 billion last month, or 14.76% lower than a year earlier. Non-tax revenues jumped by 42.50% to P34 billion.

The government runs on a budget deficit when it spends more than it makes to fund programs that support economic growth. It borrows from foreign and local sources to plug the gap.

The budget deficit has reached P1.2 trillion in the 10 months to October this year, or 27.94% higher than the shortfall in the same period last year.

The 10-month total was 65% of the revised P1.9-trillion full-year deficit ceiling.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa in an e-mail said the latest deficit numbers suggest that the 2021 total could still slip below the P1.9-trillion projection.

“Improved collections due to improving economic output is helping limit the impact on the overall deficit,” he said in an e-mail.

“Spending, however, appears to be on auto pilot with the growth rate posting a modest double-digit gain despite a torrid pace of public construction, suggesting spending in other areas remains soft. Authorities appear to be holding back on spending to rein in rising deficit and debt levels.”

Total spending increased by 11.51% to P3.7 trillion as of end-October, or around 79% of this year’s P4.7-trillion disbursement plan.

Revenue collection growth in the 10-month period inched up 5% to P2.5 trillion. This figure was “equivalent to 86% of the P2.9-trillion revised program for the year,” BTr said.

Tax collections representing 90% of the total rose by 9.11% to P2.25 trillion. Broken down, Customs collections jumped by 17.1% to P525.4 billion and the BIR generated P1.7 trillion, or 6.83% higher than a year earlier.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the deficit in October, which was at its narrowest since April, was due to the reopening of the economy. More business activity spurred higher tax collections, he added.

“Narrower budget deficits could fundamentally lead to reduced need for additional government borrowings and debt, thereby a step in the right direction to improve the country’s fiscal performance and debt management in a more sustainable manner,” he said in a Viber message.

Further reopening of the economy and the reduced risk of more lockdowns that could prompt more government spending for pandemic support programs could help narrow the deficit further, he added.

Meanwhile, Mr. Mapa said that the improved economic outlook may help limit the impact of softer spending on the country’s debt-to-GDP ratios. The country’s debt-to-GDP ratio was 63.1% as of September, the highest in 16 years, government data showed.

“Should this measure remain above 60% by mid next year, we do expect some ratings action from at least one of the major agencies,” Mr. Mapa said.