January fiscal balance swings to surplus

By Beatrice M. Laforga

THE government’s fiscal balance swung to a budget surplus in January after eight months of deficits, though lower than a year earlier as state spending overtook revenue collection, according to the Treasury bureau.

The government posted aP23-billion budget surplus, 48.3% lower than a year earlier, as spending rose 28%, faster than the 15% growth in revenue, the bureau said in a statement on Friday.

The government had consistently posted budget surpluses every January since 2017, but a narrower surplus this year showed “sustained growth” in state spending, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said in an e-mail.

Revenue rose 14.76% to P294.6 billion, with tax collections rising by 7.93% to P253.9 billion or 86% of the total. Nontax revenue nearly doubled to to P40.8 billion from a year earlier.

Taxes collected by the Bureau of Internal Revenue (BIR) rose 5.3% year on year to P194.9 billion in January, while Customs collections jumped 15.5% to P55.9 billion, data showed.

Income generated by other state offices that month also jumped 89.5% to P40.8 billion from a year earlier. Treasury bureau revenue nearly tripled to P28.4 billion.

Meanwhile, state spending also jumped 28% to P271.6 billion in January from a year earlier.

The National Treasury traced faster January spending to the timely release of internal revenue allotments, funds for the newly created Bangsamoro Autonomous Region in Muslim Mindanao and payments for negotiated checks issued in late 2019.

Primary expenditures or spending net of interest payments rose 26.4% to P210.2 billion from a year earlier.

Interest payments also increased by a third to P61.4 billion because of coupon payments for Treasury bonds, discount on Treasury bills and the timing of payments for global bonds, the bureau said.

“The budget balance remained in surplus given the continued improvement in revenue collection while expenditures posted a sterling growth print but more likely due to base effects after the slowdown noted in early 2019 due to the budget delay,” said Nicholas Antonio T. Mapa, senior economist at ING Bank NV- Manila.

Mr. Ricafort expects the government to post wider budget deficits in the coming months as the government boosts spending to contain a novel coronavirus outbreak.

Government spending, which accounts for as much as 12% of the gross domestic product, would remain a key driver for growth this year, he said. He noted that “exceptionally strong” state spending in December last year had driven the budget deficit to a monthly record of P251 billion.

Mr. Mapa said slowing economic activity could be a challenge to revenue collection, with economic managers already expecting the deficit to expand by as much as 3.6% of GDP and breach the 3.2% cap.

“Nonetheless, the government continues to have fiscal space and at this juncture, a breach in deficit target will be the least of our concerns as the need to care for our sick and limit the spread of the virus takes top priority,” he said.