Improving revenues narrow budget deficit in July

MANILA, Philippines — A larger revenue haul trimmed the national government’s budget deficit in July, although the still limited fiscal space could force the Marcos Jr administration to make hard spending choices. 

Data from the Bureau of the Treasury released Friday revealed that the national government incurred a budget deficit of P86.8 billion in July, smaller by 28.4% compared to a year ago. 

A deficit means the government is spending beyond its means. To bridge the fiscal gap, the government typically borrows money from creditors at home and abroad.

In the first seven months of the year, the deficit amounted to P761 billion.

Broken down, revenues expanded 20.53% year-on-year to P308.6 billion in July, reflecting an uptick from the collections of Bureau of Internal Revenue and Bureau of Customs. Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said the improved Customs haul was due to pricier imports. 

Import prices grew in past months amid expensive fuel prices and a weakening peso. 

“Smaller deficit is welcome. Pickup in revenue was on the back of improved BIR collection as the economy reopens. Uptick in collection also from customs due to expensive imports,” Mapa said in a Viber message. 

Government expenditures, meanwhile, grew 4.81% year-on-year to P18.1 billion. Mapa noted “spending however slowed showing the constraints of current fiscal situation.” 

The still Treasury noted spending widened amid the release of PhilHealth subsidies and national tax allocation transfers.

Treasury data showed that the deficit-to-gross domestic product ratio as of end-June slid down 6.53% compared to last year’s outturn. The Marcos Jr. administration looked to slash the deficit, as a share of GDP, to 3% by 2028. 

“Going forward the economy will be relying less on fiscal support given the fiscal handicap but with the economy reopening, hopefully there will be enough momentum to keep growth positive,” Mapa said.