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Spending boost widens fiscal deficit in Feb., first two months

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By Elijah Joseph C. Tubayan
Reporter

A SURGE in spending drove the government’s fiscal position into deficit in February that was more than double the year-ago gap, the Department of Budget and Management (DBM) announced on Wednesday.

February saw a P61.7-billion budget gap in February that was 160% bigger than the P23.7 billion recorded in the same month in 2017.

Revenues were up 18% that month to P178.5 billion from last year’s P151.8 billion. Of this amount, tax revenues increased 17% to P163.2 billion from P139 billion.

The government’s top tax bureaus saw double-digit collection increases, with the Bureau of Internal Revenue (BIR) collecting P116.6 billion, 10% more than last year’s P105.9 billion, while the Bureau of Customs (BoC) recorded a 42% jump to P43.7 billion from P30.9 billion.

In a press briefing, Budget Secretary Benjamin E. Diokno credited Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) law — which provided largely for cuts in personal income, estate and donors taxes; removal of some value-added tax exemptions; an increase in automobile, fuel, tobacco, coal and mineral taxes, and a new levy on sugar-sweetened drinks — for February’s bigger collections.

“TRAIN made the big difference,” Mr. Diokno said of the law which kicked into effect on Jan. 1.

“We were expecting that.”

February saw non-tax revenues grow 19% to P15.3 billion from P12.9 billion. Of that amount, the Treasury bureau raised P5.9 billion, up 10% from P5.3 billion, while other offices saw a bigger 25% increase in revenues to P9.4 billion from P7.5 billion.

Government spending grew 37% to P240.3 billion from P175.6 billion. Interest payments accounted for P35.2 billion, up 49% from P24.2 billion. Disbursements for other item grew 35% to P204.1 billion from P151.3 billion.

Mr. Diokno attributed the spending hike to the “‘Build, Build, Build’ (infrastructure program) and also some for the AFP (Armed Forces of the Philippines) modernization program, also the salary increases of government workers.”

February put the fiscal balance of 2018’s first two months at a P51.5-billion deficit, 140% bigger than the year-ago P21.5-billion gap.

Overall revenues grew 19% to P417.4 billion in January-February from P352.2 billion in the same two months in 2017.

Tax revenues accounted for P381 billion, 18% bigger than the year-ago P323.6 billion. Of this amount, the BIR raked in P292.3 billion, up 15% from P253.3 billion, while the BoC collected P84.5 billion, 27% more than P66.8 billion previously.

Non-tax revenues in the two-month period were P36.4 billion, 28% up from P28.5 billion. The Treasury contributed P14 billion of this amount while other government offices raised P22.5 billion — up five percent and 48%, respectively.

Expenditures in the first two months of the year stood at P469 billion, 26% more than the P373.7 billion spent in the same period in 2017. Interest payments accounted for P79.7 billion, climbing 20% from P66.6 billion previously. Non-interest expenditures increased by 27% to P389.3 billion from P307.1 billion.

Mr. Diokno said the first two months’ data show that the government is “on track” with its fiscal program for the year. “We are off to a good start for Fiscal Year 2018, and we are optimistic that we will cut down underspending even further from 2.4% last year.”

Economists interviewed said that the more than double widening of the deficit was expected, and remains manageable.

Sought for comment, Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said in an e-mail that “[t]he fiscal deficit increase was expected.”

“The doubling is also expected as government follows through with the focus on infrastructure development,” Mr. Asuncion said.

“The magnitude of the deficit is not worrying as long as economic growth responds with it and the deficit remains within a comfortable and expected level.”

Angelo B. Taningco, an economist at Security Bank Corp., shared the sentiment, noting that “both government revenues and spending recorded a healthy double-digit growth.”

“I expect the cumulative fiscal deficit to widen on strong government disbursements,” he added.

The government has capped the budget deficit this year at some P523.6 billion, equivalent to three percent of gross domestic product (GDP). The country logged a P350.6-billion fiscal gap last year, slightly smaller than 2016’s P353.4-billion deficit and 27% short of a P482.1-billion program for 2017. Last year’s full-year gap was equivalent to 2.2% of GDP, compared to 2.4% of GDP in 2016 and a three-percent program.