The NG budget gap widens to P642.8B

By means of Beatriz Marie D. Cruz, Reporter

The budget of the national government (NG) deFicit broadened in the Fin the first seven months of the year, when expenditure growth exceeded revenue, the Department of Finance (DoF) said.

Finance Secretary Ralph G. Recto told the Senate Finance Committee that the budget gap had increased by 7.2% to 642.8 billion euros as of the end of July, compared to 599.5 billion euros in the same period a year ago.

This accounts for less than half (43.32%) of the NG’s P1.48 trillionFicit ceiling for this year.

“We are on track to achieve our budget program for this year with the robust performance of the Bureau of Internal Revenue (BIR), the Bureau of Customs (BoC), the Bureau of the Treasury and our GOCCs (government-owned and – controlled companies),” Mr Recto told the hearing.

In the first seven months, government spending rose 13.2% to P3.25 trillion from P2.87 trillion a year ago. This accounted for 21.9% of gross domestic product (GDP).

Meanwhile, revenues rose 14.8% to P2.61 trillion in the January-July period from P2.27 trillion last year. This corresponded to 17.1% of GDP.

Broken down, tax revenues rose 11% to P2.24 trillion in the seven-month period from P2.02 trillion a year ago. This accounted for 14.6% of GDP.

“This strong sales performance placed us among the top Asian sales to GDP ratios of 17.1% for the Ffirst half of the year, and this is above our full year target of 16.1%,” said Mr Recto.

Mr. Recto said BIR collections increased 12.7% to P1.68 trillion at the end of July, while customs collections increased 5.8% to P535.9 billion.

Tax revenue from other ofFice rose 14.9% to P20.4 billion in the Ffirst seven months, compared to P17.8 billion last year.

On the other hand, non-tax revenues rose 44.5% to P368.8 billion as of end-July, compared to P255.3 billion in the same period last year.

This was caused by higher GOCC dividends in the Ffirst seven months of the year, Mr Recto said.

At the end of July, SPS collections rose 27.8% to P183.8 billion, while non-tax revenues from other office rose 66% to P185 billion.

The finance chief attributed the government’s strong revenue performance to intensified digitalization and improved collection strategies.

Jonathan L. Ravelas, senior advisor, professional services Firm Reyes Tacandong & Co., said the broader theFicit can be attributed to higher debt servicing costs and increased expenditure to address the effects of natural disasters.

“The likely reasons for the widening budget deficit in July include higher government spending, higher debt burdens and the impact of natural disasters. These disasters led to unexpected costs for disaster response and recovery,” he said in a Viber message.

In a Viber message, Union Bank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said the government continued its strong infrastructure efforts in the third quarter as evidenced by accelerating spending.

According to the Budget Department, state spending on infrastructure rose 20.6% to 611.8 billion euros in the first half of the year, up from 507.2 billion euros a year ago. This exceeded the P545.3 billion program for the period by 12.2%.

The NG aims to spend 5-6% of GDP on infrastructure annually until 2028.

To address the growing deficit, the government must increase revenue collections, cut spending and promote economic growth, said Robert Dan J. Roces, chief economist at Security Bank Corp.

Meanwhile, the DoF expects average annual revenue growth of 10.3% in the medium term as it ramps up its digitalization strategies, Mr Recto said.

These strategies include improving border security, revenue collection and protection of the revenue base, adaptive regulation and compliance monitoring, vigilant enforcement operations and robust intelligence gathering activities, and effective stakeholder engagement and interagency cooperation.

Revenues as a percentage of GDP are expected to rise to 16.15% in 2025, 16.21% in 2026, 16.59% in 2027 and 16.96% in 2028.

For this year, the government’s budget deficit ceiling is 5.6% of GDP. The government wants to reduce the deficit ratio to 3.7% of GDP by 2028.

Budget deficit data for July will be released on Wednesday, the Finance Ministry said.