Budget deficit widens in October as spending outpaced recovering revenues

MANILA, Philippines — The national government’s budget shortfall skyrocketed in October amid surging government spending and improving revenue collections. 

Data released by the Bureau of the Treasury on Friday showed that the budget deficit expanded 54.08% year-on-year to P99.1 billion in October. In the first 10 months, the budget gap amounted to P1.1 trillion, lower by 7.61% compared with a year ago.

The deficit means the government continued to spend beyond its means, as authorities try to meet the country’s needs while revenues from tax and non-tax collections recover from a pandemic-induced slump in economic activity. To bridge the budget gap, the government would have to borrow money from creditors.

Data broken down showed revenues improved 14.14% year-on-year to P288.9 billion in September. Mostly composed of tax collections, the haul grew 18.31% on a yearly basis in the first 10 months, accounting for 90% of the target. 

Customs collections outpaced last year’s haul by 35.16% on-year to finish with P75.1 billion in October. Year-to-date collections already hit 99% of the agency’s P721.5 billion target for 2022. 

Meanwhile, expenditures surged 22.2% year-on-year to P387.9 billion in October. The expansion was on account of higher national tax allotments for local government and subsidy disbursement of government corporations such as PhilHealth, the state-health insurer.

Government spending inched up 9.87% on-year to P4.1 trillion in the first 10 months, comprising 82% of the target. 

Domini Velasquez, chief economist for China Banking Corp., noted increasing government spending was a positive development. Economists feared that the national government’s limited fiscal space, on account of the Duterte administration’s borrowing spree to fund pandemic response, would leave socioeconomic programs out to dry. 

“The increase in budget deficit in October is actually a positive signal that the government is ramping up spending to reach its expenditure target, and therefore continue to push up economic growth,” she said in a Viber message. 

Velasquez explained that the uptrend in revenue collections indicated that the Marcos Jr. administration could extend itself to spending on programs. 

“As long as the government sticks to its fiscal target and its plan to bring down deficit over the medium term, we think that this will be viewed positively by investors, credit rating agencies, and the like,” Velasquez added.