March deficit widens as spending outpaces growth in revenues

By Justine Irish D. Tabile, Senior Reporter

THE National Government’s fiscal gap widened in March as spending growth outpaced revenue gains, even as the first quarter still ended with a narrower deficit due to stronger cumulative collections.

In a statement on Thursday, the Bureau of the Treasury said the budget deficit in March rose 2% to P349.7 billion from a year earlier, driven by faster growth in government expenditures relative to revenues.

“This outturn reflects a higher year-on-year increase in expenditures of P32.6 billion, which outpaced the P25.8 billion rise in revenues,” the Treasury said.

Government revenues for the month increased 9.3% to P305.1 billion, supported by both tax and nontax sources, while expenditures climbed 5.2% to P654.8 billion.

Spending was lifted by higher transfers to local government units, including their share in national taxes and special allocations, as well as increased support to government-owned and -controlled corporations (GOCCs).

The government also released P20 billion to the Department of Energy for its emergency energy program to help shore up fuel supply amid external supply risks linked to the war in the Middle East.

Despite the March increase, the fiscal position for the first quarter was stronger than last year as revenue growth outpaced spending over the period.

The Bureau of Internal Revenue collected P719.2 billion in January to March, up 4.2% from a year earlier, supported by improved tax administration and digital systems aimed at reducing leakages.

The Bureau of Customs generated P239.4 billion, 3.5% higher year on year, backed by enforcement reforms under its Integrity, Accountability and Modernization program.

Total revenues for the first quarter rose 13.7% to P1.14 trillion, driven in part by higher nontax income, which more than doubled to P166.1 billion on early dividend remittances from GOCCs.

Tax revenues accounted for 85.4% of total collections at P969.2 billion.

Cumulative expenditures reached P1.49 trillion as of end-March, up 3.2% from a year earlier.

Primary expenditures rose 1.2% to P1.22 trillion, while interest payments increased 13.3% to P273.1 billion, reflecting higher debt servicing costs.

The primary deficit narrowed 59.8% to P82.4 billion in the first quarter from a year earlier.

“March expenditures increased mainly due to higher transfers to local government units, additional budgetary support to GOCCs, and a one-off release to support fuel supply amid geopolitical risks,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

“While revenues posted solid growth in March, it was not enough to fully offset the pickup in disbursements, resulting in a marginally wider monthly deficit,” he added.

FUEL SUBSIDIES

Rising oil prices and tighter fuel supply have prompted the government to declare a national energy emergency, rolling out subsidies, fuel discounts and temporary tax relief on kerosene and liquefied petroleum gas.

China Banking Corp. Chief Economist Domini S. Velasquez said the March increase reflects the rollout of subsidies to cushion sectors affected by the oil shock.

“As support measures expand, the fiscal deficit is expected to widen in the near term,” she said via Viber.

She added that infrastructure disbursements remain a positive development due to their multiplier effects on growth.

“The composition of spending will ultimately depend on the duration of the conflict: a prolonged war would skew expenditures toward current subsidies and social support, while an early resolution would provide the government with more fiscal space to ramp up infrastructure,” Ms. Velasquez said.

Mr. Asuncion said oil price mitigation measures, including subsidies and tax exemptions, might place some upward pressure on the fiscal deficit.

“Part of this has already been reflected in March disbursements linked to energy-related support programs,” he said. “That said, these interventions are designed to be temporary and well-targeted, rather than a permanent expansion of government spending.”

He said stronger revenue performance, supported by improved tax administration and higher nontax inflows, would help create fiscal space to absorb short-term pressures.

“The sharp improvement in the primary balance in the first quarter also points to better underlying fiscal health,” Mr. Asuncion said.

“Overall, while the deficit could widen modestly in the coming months, any impact from oil-price mitigation measures is expected to be manageable and consistent with the government’s full-year fiscal objectives,” he added.