MANILA, Philippines — The government posted a budget surplus in April, as better revenue collections eclipsed a measly spending growth that was hit by a ban on public works ahead of the elections.
Data released by the Bureau of the Treasury on Friday showed the government recorded a budget surplus of P4.9 billion last month. A surplus happens when revenues growth outpaced public spending.
But in the first four months, the state’s budget balance still posted a deficit of P311.9 billion, which was nevertheless 14.76% smaller compared with the same period last year.
Sought for comment, Leonardo Lanzona, an economist at Ateneo De Manila University, said posting a budget surplus while there’s a threat of stagflation “does not bode well for the economy”.
A stagflation happens where there’s a slow or stagnant economic growth while inflation is rising. It’s a dangerous combo that Lanzona believes could be avoided if there is robust public spending on the right programs that could support the economy and tame inflation.
"This indicates the limited capacity of the government to provide economic stimulus and its failure to distribute the benefits of the current growth to the poorer sectors of the economy. While we may in fact reduce inflation under this set-up, inequality and poverty can increase," Lanzona said.
“Given that we are still in the process of economic recovery, I expected a more active government," he added.
Figures showed the Duterte administration's revenue haul grew 19.19% year-on-year to P348 billion in April, thanks to improved tax collections and bigger contributions from state-run corporations, which remit dividends to the national government.
Excluding tax refunds, the Bureau of Internal Revenue netted P239.6 billion last month, up 9.39% on an annual basis. The Bureau of Customs, meanwhile, generated P65.7 billion in April, up 26.82% year-on-year which the agency attributed to heightened crackdown on illegal importations and better compliance by importers.
Government spending, however, inched up by only 1.98% on-year to P343 billion amid a state spending ban before the May elections. At the same time, the expenditures figure was underwhelming because it was compared to the data from last year, when spending was abnormally high after the government released cash aid to areas under enhanced community quarantine following a COVID-19 flare-up.
Temporary
For Nicholas Antonio Mapa, senior economist at ING Bank in Manila, the fiscal surplus last month is only temporary, adding that the government’s budget balance will likely return to deficit in the next months.
"We expect the budget to revert to the deficits in the near terms as spending is allowed to resume. In the coming months, revenue collection will be key to ensuring deficits are contained in an effort to limit the impact on the overall debt levels," Mapa said in a Viber message.
For this year, the government retained its budget deficit limit to 7.6% of gross domestic product, which is forecast to narrow to 6.1% in 2023 and 5.1% in 2024.
Shrinking the budget deficit would be a major challenge for the incoming Marcos administration.