MANILA, Philippines, 26 August 2020 – The National Government’s (NG) budget deficit for July reached P140.2 billion, up 86.21% from the same month last year. The higher deficit for the month reflects the 10.40% growth in government expenditures, boosted by the implementation of various COVID-19 rehabilitation and recovery measures vis-à-vis an 11.22% drop in revenue collection. The strong July outturn pushed the January-July budget gap to P700.6 billion, almost six times the P117.9 billion shortfall incurred as of end-July 2019.
Revenue Performance
Government revenues for July fell by 11.22% year-over-year (YoY) to P234.5 billion due to the adverse impact of the health crisis on economic activity. On a year-to-date (YTD) basis, total collection stood at P1,687.8 billion, also down by 6.84% from the previous year’s outcome of P1,811.6 billion, with 85% of collections coming from tax revenues.
The Bureau of Internal Revenue’s (BIR) collections for the month amounted to P159.0 billion after deducting the P1.6 billion tax refund paid to various claimants, declining by 11.84% or P21.4 billion over last year’s level. Similarly, the agency’s resulting cumulative collection of P1,115.4 billion for the first seven months of the year represented a 10.53% or P131.3 billion YoY contraction.
The Bureau of Customs (BOC) raised a total of P49.8 billion for July, net of P98 million tax refund. BOC’s July performance was 8.84% lower compared to the P54.6 billion achieved in the same month a year ago, weighed down by disruptions to trade caused by lockdown. This trimmed BOC’s aggregate collection as of end-July to P302.9 billion from the prior year’s total of P357.7 billion.
July income generated and collected by the Bureau of the Treasury (BTr) amounting to P7.6 billion was 46.74% slower YoY due to the early remittance of dividends this year as well as lower NG share from PAGCOR and interest earned from government deposits which declined by P2.6 billion YoY. BTr’s cumulative revenue for the seven-month period, on the other hand, grew by 87.16% to P190.9 billion and already exceeded the original full-year target of P82.3 billion by more than P108.6 billion contributed by higher dividends and other government service income.
The P14.6 billion collections from other offices (other non-tax including privatization proceeds and fees and charges) was up 12.43% over last year partly due to the payment of P4.3 billion concession fees made by the MPCALA Holdings Inc. in connection with the Cavite-Laguna Expressway (CALAX) project. The YTD collection of P68.3 billion, however, is still lower by 25.70% relative to 2019’s level because of the restrictions to some economic activities as well as government operations caused by the ongoing COVID-19 pandemic.
Expenditure Performance
NG disbursements for July rose to P374.7 billion, up 10.40% from a year ago, driven by the second tranche releases for the Social Amelioration Program (SAP) in line with the implementation of RA 11469 or the Bayanihan to Heal as One Act and other COVID-19 related expenditures. Likewise, the cumulative spending of P2,388.4 billion notched a double digit-growth of 23.78% from the Jan-Jul 2019 figure.
July primary expenditure (net of interest payment) stood at P315.3 billion, growing 9.32% YoY. YTD, total primary spending of P2,141.3 billion was also 26.07% faster than it was in 2019. Interest payments (IP) for the month increased by 16.52% to P59.4 billion mainly driven by the interest paid in advance for Global Bonds for which the original schedule of payment fell on a weekend (August 1, 2020). In total, the P247.1 billion YTD IP expanded by 6.94% from last year’s actual payment of P231.0 billion.
As a percentage of revenue, IP from Jan-Jul 2020 accounted for 14.64%, increasing from the previous year’s level of 12.75% due to lower collections. Meanwhile, IP as a percentage of expenditure improved to 10.34% from 11.97% a year ago due to faster spending.
Primary Surplus/ (Deficit)
Excluding interest payments from expenditures, NG’s primary deficit for July was at P80.8 billion, more than three times the level for the same month last year. The resulting cumulative primary balance was also at a deficit of P453.6 billion, reversing last year’s primary surplus of P113.1 billion.
Fiscal Indicators
The deficit-to-GDP ratio for the first half of the year stood at 6.52% compared to 0.46% last year due to the combined fiscal and economic impact of the Covid-19 pandemic. The revenue effort inched-up to 16.90% from 16.68% a year ago although tax effort declined to 14.14% against 14.88% for the Jan-Jun 2019 period. Expenditure effort, on the other hand, significantly improved to 23.42% relative to S1 2019’s 17.14%.
