Manila, Philippines – The government incurred a budget deficit in February as state spending grew faster than revenues, the Bureau of the Treasury reported on Wednesday.
The month’s P61.7-billion shortfall was a reversal of the P10.2-billion surplus in January. It was higher than the P23.7-billion deficit recorded in February 2017.
Government revenues rose by 18 percent to P178.5 billion, from P151.8 billion last year, while expenditures grew 37 percent to P240.3 billion from P175.6 billion.
The Bureau of Internal Revenue accounted for the bulk of collections at P116.6 billion, 10 percent higher compared to the year-earlier P105.9 billion.
Non-tax earnings, meanwhile, totaled P15.3 billion with the Bureau of the Treasury contributing P5.9 billion—up 10 percent.
Other offices contributed P9.4 billion, 25 percent higher from last year.
The bulk of government expenditures were for items classified as “others,” which rose by 35 percent to P204.1 billion. Interest payments totaling P36.2 billion, up 49 percent year on year, accounted for the rest of state spending for the month.
February’s results led to a cumulative budget shortfall of P51.5 billion for the first two months of the year, higher than the P21.5-billion deficit during the comparative 2017 period.
January to February revenues grew 19 percent year-on-year to P417.4 billion, from P352.2 billion, while year-to-date expenditures registered growth of 26 percent to P469 billion from P373.7 billion.
“Other” expenditures rose 27 percent to P389.3 billion, while interest payments recorded 20 percent growth to P79.7 billion.
Netting out interest payments, the government recorded a P25.6-billion primary surplus in February, a reversal of the P500 million primary surplus last year.
Year-to-date, the primary balance hit a surplus of P28.1 billion, narrower than last year’s P45.1-billion surplus.
Land Bank of the Philippines market economist Guian Angelo Dumalagan said the fiscal performance report was quite promising as it supported views that government spending would help spur economic growth this year.
This should help boost investor confidence by validating market expectations, he said.
“With that said, I think an important aspect to monitor now is consistency. While the government is starting on a
strong note, it remains to be seen if such strength would endure for the rest of the year and translate to an achievement of the government’s spending and revenue targets,” Dumalagan added.
ING Bank senior economist Joey Cuyegkeng, meanwhile, said increased government spending was positive for first-quarter gross domestic product (GDP) growth.
“Headline and core government spending growth rates accelerated in February to 37 percent and 35 percent, respectively. These annual increases are not just a result of base effects with February 2017 spending of near flat year-on-year,” he explained.
Cuyegkeng added that government policies of a “cash-based budget” and the one-year effectivity of the approved budget procurement program were pushing government agencies to improve spending performance.
Higher growth seen
He also pointed out that spending was on track to hitting 31 percent growth in the first quarter, significantly faster than year-earlier result of just 2 percent.
“This implies that March spending should continue at an accelerated pace of 39 percent annual gain. The strong fiscal stimulus would offset the drag that higher inflation may have on household spending and moderate business and investment spending,” Cuyugkeng said.
This will likely bring the first quarter GDP growth closer to government’s 2018 target growth of 7-8 percent, he added.
“We have revised higher our first quarter GDP growth forecast from 6.5 percent to 6.9 percent and full year growth to 6.8 percent from 6.7 percent,” Cuyugkeng said.