How did the Philippines end up with a budget deficit that surged by 43% in just one month? The answer lies in the balance—or imbalance—between government spending and revenue collection.
The national government’s budget deficit widened to PHP174.9 billion in May this year from PHP122.2 billion in the same month last year, marking a significant increase as government expenditure outpaced revenue collections.
Government Spending Outpaces Revenue Growth
In a news release on Thursday, the Bureau of the Treasury (BTr) attributed the higher deficit to an acceleration in government spending. Disbursements grew by 22.4% compared to a revenue expansion of only 14.59%.
The Philippines’ budget deficit has therefore become a point of concern, as state collections in May reached PHP382.1 billion, up from PHP333.4 billion last year.
Notably, the revenue growth was driven by higher non-tax collections, which contributed significantly to the overall increase.
For the year-to-date, total revenue stood at PHP1.9 trillion, a 16.34% improvement from the previous year’s performance. Of this, 85.59% was generated through taxes, while the remaining 14.41% came from non-tax sources.
Rising Expenditures
Meanwhile, national government expenditures in May totaled PHP557 billion, a 22.24% increase compared to the PHP455.7 billion spent a year ago.
This rise in spending was primarily due to the implementation of capital outlay projects by the Department of Public Works and Highways and the Department of National Defense.
Additionally, social and health programs by the Department of Social Welfare and Development and the Department of Health contributed to the surge in disbursements.
Higher national tax allotment shares of local government units and increased budgetary support to government-owned and controlled corporations also played a role in the expenditure growth.
From January to May, total state expenditures amounted to PHP2.3 trillion, a 17.65% increase from the PHP1.9 trillion posted during the same period in 2023.
The Impact of Debt and Interest Payments
A significant portion of the deficit is also due to rising interest payments. In May alone, interest payments reached PHP61.1 billion, reflecting a 47.78% year-on-year growth. This increase is attributed to additional debt incurred last year and higher interest rates on both domestic and foreign borrowings.
For the first five months of the year, the fiscal deficit reached PHP404.8 billion, which is 24.06% higher than the PHP326.3 billion recorded during the same period in 2023.
The primary deficit, which excludes interest payments, stood at PHP113.8 billion for May, marking a 40.71% increase from the previous year.
Balancing the Budget
While revenue collection has shown improvement, the rate of government spending has outpaced it, leading to a widening budget deficit. The Bureau of the Treasury’s data underscores the importance of managing the balance between revenue and expenditure to ensure fiscal stability.
As the Philippines continues to navigate its economic challenges, monitoring and adjusting financial strategies will be crucial to maintaining a healthy fiscal position.
Focus Points:
- The budget deficit for May 2024 widened to PHP174.9 billion, a 43.10% increase from the previous year.
- Revenue collection in May totaled PHP382.1 billion, driven by higher non-tax collections.
- Government expenditures in May reached PHP557 billion, up by 22.24% due to infrastructure and social programs.
- Interest payments in May increased by 47.78% year-on-year to PHP61.1 billion.
The Philippines’ fiscal landscape reflects a complex interplay of revenue and expenditure. With continued efforts to bolster revenue collection and manage spending, the nation aims to achieve a more balanced budget in the coming months.
Sources: THX News, Bureau of the Treasury (document) & Philippine News Agency.
