More leeway for economic pump-priming

Budget deficit falls below target

The Duterte administration inherited a budget deficit that is less than half of this year’s cap, putting on track plans to speed up spending in and out of the capital.

For the first six months, the budget gap – which indicates more revenues were spent than earned – widened to P120.32 bil- lion, the Department of Finance (DOF) reported yesterday.

This was a reversal of the P13.75-billion surplus a year ago, but was only around 42 percent of the original cap of P283.7 billion for 2016, equivalent to two percent of gross domestic product (GDP).

The new government revised the goal to 2.5 percent upon taking over.

“Economic managers under the Duterte admin- istration vowed to accelerate public spending by fast-tracking infrastructure development...,” DOF said in a statement.

“The national government also plans to ramp up infrastructure spending outside Metro Manila,” it added.

Broken down, revenues inched up one percent to P1.1 trillion in the first semester, while disbursements rose 14 percent to P1.221 trillion.

In June alone, the deficit reached P45.19 billion, 38 percent down from last year as revenues rose 13 percent and expenditures went down seven percent.

The DOF, under a new management, reiterated criticisms on the previous administration’s “persistent underspending despite healthy revenue growth.”

Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said the report showed President Duterte has “a lot of space to expand capital outlays,” projected to hit five percent of GDP.

Last year, infrastructure spending accounted only for 3.3 percent of GDP.

“But, as I mentioned earlier, there could be some notable adjustments in different agencies that will prevent immediate disbursement of programs,” Neri said in a phone interview.

“There will be some learning curve,” he added.

Breaking down expenditures, actual agency spending accelerated 17 percent, while debt interest payments decreased two percent by the end of June, data showed.

Most debts were paid in pesos amounting to P103.88 billion, while their foreign counterparts reached P49.83 billion. The former was down five percent, the latter up six percent.

On the revenue side, the Bureau of Internal Revenue (BIR) increased collections 11 percent, while that of the Bureau of Customs went up seven percent year-on-year.

BIR and Customs, which are overseen by the DOF, accounted for more than 90 percent of state revenues with P783.42 billion and P190.55 billion, respectively.

The Treasury contributed P63.7 billion, while other offices raised P55.21 billion. Both dropped five and 56 percent from last year’s levels.

“I don’t think we will have the same problem as before when it comes to revenues even with plans to lower income taxes,” said Emmanuel Lopez, economics department chair at the University of Santo Tomas.

“Higher demand and investment resulting from lower taxes will offset any revenue losses,” he added.