Budget gap shrinks as revenues rise in May

The national government’s cumulative budget deficit as of end-May shrank by P107.5 billion year-on-year on the back of a more robust revenue collection and a slowdown in state spending.

Budget shortfall for the first five months of the year narrowed to P458.7 billion, down by almost 19 percent from P566.2 billion recorded in the comparable period in 2021, latest data from the Bureau of the Treasury showed.

Budget deficit occurs when expenditures exceed revenues.

More revenues were collected by the government during the period, posting a double-digit growth of 15.46 percent to reach P1.44 trillion from P1.24 trillion a year ago on the back of higher tax and non-tax revenues.

Meanwhile, state expenditures from January to May hit P1.896 trillion, up by 4.69 percent from the previous year’s P1.81 trillion.

For the month of May, the budget gap also fell to P146.8 billion, contracting by nearly 27 percent year-on-year from P200.3 billion.

Revenues in May this year stood at P304.9 billion, jumping by 18.9 percent from P256.4 billion in the same month last year as more tax revenues were collected.

Expenditures, however, dipped by 1.1 percent to P451.7 billion from P456.7 billion as primary spending fell.

Primary spending, which excludes interest payments, decreased in May by 2.32 percent to P417.9 billion from P427.8 billion in the same month last year.

For ING Bank senior economist Nicholas Mapa, improved revenue collection and the slowdown in expenditures ahead of the elections due to bans resulted in the continued narrowing of budget deficit as of end-May.

“Budget deficit continues to narrow given improved collection.  Two factors driving this.  One would be increased BoC [Bureau of Customs] collections associated with more pricey global crude prices.  Secondly, improving economic situation results in higher collections as economic activity picks up.”

Both the government’s main collection agencies—the Bureau of Internal Revenue (BIR) and the BOC—recorded better collection performance as of end-May this year.

During the period, the BIR collected P959 billion, up by 9.92 percent from P872.4 billion a year ago.

Meanwhile, the BOC’s cumulative revenue take surged by 28.4 percent to P320.5 billion from P249.6 billion in the comparable period last year.

While there was slowdown in state spending, Mapa said the incoming Marcos administration expressed willingness to pursue aggressive spending to help the economy recover despite high levels of debt and deficit.

“Should sizable fiscal stimulus package be deployed this year, we could see the deficit widen unless revenue collection can keep up.”

Given this, Mapa said it is hard to conclude whether the government is on track to hitting its lower programmed budget deficit for the year.

“Difficult to say and that will depend largely on the new administration.  They will need to improve collection should they opt to spend more,” he said.

The Cabinet-level Development Budget Coordination Committee programmed this year’s budget deficit to settle at P1.651 trillion, equivalent to 7.6 percent of GDP.

Last year, the national government’s budget deficit soared to a new record-high of P1.67 trillion on the back of weaker revenue collection and increased spending amid the Covid-19 pandemic.

As share of the Philippine economy last year, budget deficit also soared to an unprecedented level of 8.61 percent.