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Philippines: Improving revenues shrink budget deficit in March

  • Apr 28, 2022

MANILA, Philippines — The government’s budget shortfall narrowed in March as revenue collections improved amid looser mobility curbs.

What’s new

Data released by the Bureau of Treasury on Wednesday revealed that the budget deficit shrank 1.97% year-on-year to P187.7 billion in March. In the first quarter, the deficit amounted to P316.8 billion, 1.44% smaller compared with a year ago.

Why this matters

The deficit means the government continued to spend beyond its means as authorities try to meet the country’s pandemic needs while revenues from tax and non-tax collections remain tepid due to anemic economic activity. To bridge the budget gap, the government would have to borrow money from investors.

That said, the narrowing of budget deficit is a welcome development for a government that has been trying to temper the growth of debts that have piled up because of the pandemic by limiting spending.

What an analyst says

For Nicholas Antonio Mapa, senior economist for ING Bank in Manila, the increase in government expenditures was due to the nearing election spending ban.

“The 18.1% pickup in government spending can be traced to last-minute expenditures ahead of the start of the ban on new projects in connection with the May polls,”  he said in an emailed commentary.

Revenues grew 35.96% year-on-year to P293.9 billion in March, citing better collection efforts. Year-to-date, collections reached 58.07% to P16.4 billion.

Expenditures likewise rose 18.14% year-on-year to P481.5 billion due to higher “National Tax Allocation releases and budgetary support to GOCCs for the period.” Government spending rose to P1.1 trillion on a three-month basis.

In the months to come, Mapa expects the next president will face difficulties in making budgetary decisions.

“In the coming months, and with the changeover in leadership, the new administration must look to walk the very thin line of fiscal prudence at a time when the economy may be in need of support.  Unlike in 2016, the incoming president will be inheriting a substantial debt pile, which will impact his or her ability to hit the ground running,” he said.

“Thus, the new leader will need to ensure revenues collections continue to grow while spending of precious funds is directed towards projects that will have a near term impact on growth,” Mapa added.

Separately, Sonny Africa, executive director at IBON Foundation, a non-profit think tank, said: “More than indicating an improving situation, the slightly smaller year to date deficit reflects the government’s excessive fiscal conservatism which prolongs suffering and hinders more rapid recovery.”

Source: https://www.philstar.com/business/2022/04/27/2177193/improving-revenues-shrink-budget-deficit-march