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Government underspending reduces deficit

Bureau of the Treasury building in Intramuros, Manila
Bureau of the Treasury building in Intramuros, Manila

THE national government’s budget deficit for the first half of the year fell below program as the government missed its spending target for the period.

The negative cash flow from January to June this year stood at P674.2 billion, lower than the programmed budget deficit of P828.7 billion by 18.64 percent, latest data from the Bureau of the Treasury showed.

The figure was also narrower by 5.84 percent than the recorded budget gap of P716.1 billion in the same period last year as revenues grew faster than expenditures.

When revenues exceed expenditures, a budget deficit occurs. A smaller budget deficit could also mean less need for the government to borrow money to finance its spending requirements. Government spending reached P2.4 trillion in the first semester of this year, falling short of the P2.477-trillion target by P75.4 billion or 3.04 percent.

The Treasury said the government missed its spending target largely due to “slower-than-expected capital expenditures amid the election ban in late March up to early May.”

Catch-up

GOVERNMENT expenditures for the first six months of this year rose by 8.85 percent from the P2.21 trillion recorded in the same period in 2021.

Given the underspending in the first semester of the year mainly because of the election ban, Finance Secretary Benjamin E. Diokno separately told reporters on July 26 that the government would have to implement a catch-up plan.

Definitely mabilis lang magcatch-up. Pagbabayaran lang yung mga nagawa na,” said Diokno, who also served as budget secretary and later central bank governor under the Duterte administration.

Rizal Commercial Banking Corp. Chief Economist Michael Ricafort told the BusinessMirror government’s underspending wouldn’t necessarily drag the country’s economic growth.

“Since there are other offsetting growth drivers this year such as election-related spending, further re-opening of the economy towards greater normalcy, further pick up in foreign and domestic tourism, phased face-to-face schooling, increased infrastructure spending,” Ricafort said.

Revenues

REVENUES during the period hit P1.73 trillion, exceeding the P1.65-trillion target by 4.8 percent.

Likewise, revenues even posted a double-digit growth of 15.91 percent from P1.49 trillion recorded in the first half of last year.

This, despite the government’s main tax collection agency—the Bureau of Internal Revenue—slightly falling short of its mid-year target of P1.165 trillion by 2.77 percent after it collected a total of P1.13 trillion.

For its part, the Bureau of Customs exceeded its mid-year goal of P360.7 billion by 9.98 percent.

For the month of June alone, the government’s budget deficit widened to P215.5 billion, up by 43.81 percent from P149.9 billion recorded in the previous year as expenditures outpaced revenues.

Expenditures during the month stood at P505.8 billion, soaring by 27.91 percent from P395.4 billion in June last year.

Revenues also reached P290.3 billion, climbing by 18.2 percent year-on-year from P245.6 billion.

The Cabinet-level Development Budget Coordination Committee expects a lower budget deficit this year at P1.65 trillion, or 7.6 percent of the country’s GDP.

Last year, the national government’s budget deficit soared to a new record-high of P1.67 trillion on the back of weaker revenue collection and increased spending amid the Covid-19 pandemic.

As a share of the Philippine economy last year, the budget deficit also soared to an unprecedented level of 8.61 percent.

The economic team aims to reduce the national government’s deficit-to-GDP ratio to three percent by the end of the term of President R. Marcos Jr. by raising more revenues through supporting the country’s economic growth.

Image credits: Walter Eric Sy | Dreamstime.com



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