Government reverts to budget deficit in May amid higher state spending

MANILA, Philippines — The government recorded a higher budget deficit of P175 billion in May as state spending accelerated particularly on infrastructure projects, effectively offsetting the increase in revenue collections, according to the Bureau  of the Treasury.

BTr data showed the Marcos administration reverted back to a budget shortfall of P174.9 billion in May after a quick surplus of P42.7 billion in April due to the tax season.

The May fiscal turnout is 43 percent higher than the P122.2 billion deficit in the same period last year.

A budget deficit means that the government is spending beyond what it earned from revenue collections and at a faster pace this time around.

For the five-month period, the budget deficit went up by 24 percent to P404.8 billion from P326.3 billion a year ago as spending outpaced revenue growth during the review period.

Data showed that government spending in May jumped by 22 percent to P557 billion from P455.7 billion in the same period in 2023.

Primary expenditures at P496 billion accounted for 89 percent of the total spending, up by nearly 20 percent from a year ago.

The Treasury explained that spending for the month was driven by the implementation of capital outlay projects of the Department of Public Works and Highways and the Department of National Defense.

Also contributing to the larger spending was the social and health programs of the government.

This was likewise boosted by the hike in the national tax allotment shares of local government units due to better tax collections in 2021, which was the base year for the determination of the 2024 shares.

Apart from primary expenditures, the government also jacked up its interest payments by 48 percent to P61.1 billion from P41.3 billion a year ago.

For the five-month period, disbursements rose by 18 percent P2.26 trillion. During the same time last year, the government was affected by the slow budget spending of state agencies which impacted overall economic growth.

Since then, the economic team called on agencies to ramp up budget releases and spending to stimulate economic activities.

Total revenue collection in May improved by 15 percent to P382.1 billion from P333.4 billion in the same period last year, as both tax and non-tax revenues increased.

The bulk or 80 percent of the revenues came from tax collections at P303.9 billion, up by 3.35 percent from a year ago. Non-tax collections, on the other hand, soared by almost 100 percent to P78.2 billion in May.

The Bureau of Internal Revenue (BIR)’s haul slightly improved by 2.79 percent to P219.2 billion while the Bureau of Customs (BOC) managed to post a four percent increase in collection to P81.3 billion.

The higher BIR collection was due to increased collections on value added tax, taxes on net income and profit and miscellaneous tax.

The Treasury attributed BOC’s performance to the continued monitoring of the values and classifications of imported commodities, as well as intensified border control and improved trade facilitation.

Further, income generated by the Treasury surged by 181 percent to P70.2 billion on the back of higher collections from interest on advances from government corporations, guarantee fees and remittance of shares in the Philippine Amusement and Gaming Corp. profit.

Collection from other offices including privatization proceeds and fees and charges for the month, however, slipped 44 percent to P8 billion due to the reclassification of accounts from the previous months’ transactions.

Year-to-date, cumulative revenue collections picked up by 16 percent to reach P1.85 trillion.