By Justine Irish D. Tabile, Senior Reporter
THE National Government’s fiscal gap widened in March as spending growth outpaced revenue gains, whilst the primary quarter still ended with a narrower deficit because of stronger cumulative collections.
In an announcement on Thursday, the Bureau of the Treasury said the budget deficit in March rose 2% to P349.7 billion from a yr earlier, driven by faster growth in government expenditures relative to revenues.
“This outturn reflects the next year-on-year increase in expenditures of P32.6 billion, which outpaced the P25.8 billion rise in revenues,” the Treasury said.
Government revenues for the month increased 9.3% to P305.1 billion, supported by each tax and nontax sources, while expenditures climbed 5.2% to P654.8 billion.
Spending was lifted by higher transfers to local government units, including their share in national taxes and special allocations, in addition to increased support to government-owned and -controlled corporations (GOCCs).
The federal government also released P20 billion to the Department of Energy for its emergency energy program to assist shore up fuel supply amid external supply risks linked to the war within the Middle East.
Despite the March increase, the fiscal position for the primary quarter was stronger than last yr as revenue growth outpaced spending over the period.
The Bureau of Internal Revenue collected P719.2 billion in January to March, up 4.2% from a yr earlier, supported by improved tax administration and digital systems geared toward reducing leakages.
The Bureau of Customs generated P239.4 billion, 3.5% higher yr on yr, backed by enforcement reforms under its Integrity, Accountability and Modernization program.
Total revenues for the primary quarter rose 13.7% to P1.14 trillion, driven partially by higher nontax income, which greater than doubled to P166.1 billion on early dividend remittances from GOCCs.
Tax revenues accounted for 85.4% of total collections at P969.2 billion.
Cumulative expenditures reached P1.49 trillion as of end-March, up 3.2% from a yr earlier.
Primary expenditures rose 1.2% to P1.22 trillion, while interest payments increased 13.3% to P273.1 billion, reflecting higher debt servicing costs.
The first deficit narrowed 59.8% to P82.4 billion in the primary quarter from a yr earlier.
“March expenditures increased mainly because of higher transfers to local government units, additional budgetary support to GOCCs, and a one-off release to support fuel supply amid geopolitical risks,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in a Viber message.
“While revenues posted solid growth in March, it was not enough to completely offset the pickup in disbursements, leading to a slightly wider monthly deficit,” he added.
FUEL SUBSIDIES
Rising oil prices and tighter fuel supply have prompted the federal government to declare a national energy emergency, rolling out subsidies, fuel discounts and temporary tax relief on kerosene and liquefied petroleum gas.
China Banking Corp. Chief Economist Domini S. Velasquez said the March increase reflects the rollout of subsidies to cushion sectors affected by the oil shock.
“As support measures expand, the fiscal deficit is anticipated to widen within the near term,” she said via Viber.
She added that infrastructure disbursements remain a positive development because of their multiplier effects on growth.
“The composition of spending will ultimately depend upon the duration of the conflict: a protracted war would skew expenditures toward current subsidies and social support, while an early resolution would supply the federal government with more fiscal space to ramp up infrastructure,” Ms. Velasquez said.
Mr. Asuncion said oil price mitigation measures, including subsidies and tax exemptions, might place some upward pressure on the fiscal deficit.
“A part of this has already been reflected in March disbursements linked to energy-related support programs,” he said. “That said, these interventions are designed to be temporary and well-targeted, reasonably than a everlasting expansion of presidency spending.”
He said stronger revenue performance, supported by improved tax administration and better nontax inflows, would help create fiscal space to soak up short-term pressures.
“The sharp improvement in the first balance in the primary quarter also points to raised underlying fiscal health,” Mr. Asuncion said.
“Overall, while the deficit could widen modestly in the approaching months, any impact from oil-price mitigation measures is anticipated to be manageable and consistent with the federal government’s full-year fiscal objectives,” he added.