Budget swings to P32.2-B deficit in July

Government spending surges at fastest pace in 13 months 

MANILA, Philippines - The Aquino administration’s budget balance swung to a deficit in the first seven months of the year after government spending accelerated at its fastest rate in 13 months, the Bureau of the Treasury reported yesterday.

The budget gap – the difference between government expenditures and revenues – reached P32.2 billion in July, wider than last year’s P1.8 billion.

This brought the year-to-date fiscal performance to a deficit of P18.5 billion, reversing the first half budget surplus of P13.7 billion. The government has capped its deficit at P284 billion this year.

“The pace of expenditure growth we are seeing has a clear positive trend since we adopted a whole-of-government approach to address underspending,” Finance Secretary Cesar Purisima said in a statement.

“Expenditures are on track to drive our growth for the third quarter,” he added.

For July, revenues reached P178.5 billion, seven percent up from last year. Disbursements surged by 25 percent from a year ago - the fastest since June 2014’s 44-percent uptick – to hit P210.7 billion.

For the first seven months, revenues were up 15 percent to P1.264 trillion, data showed. Spending, meanwhile, reached P1.282 trillion, an improvement of 11 percent from last year.

Emilio Neri Jr., lead economist at the Bank of the Philippine Islands, said while expansion in disbursements is a “welcome development,” much of July’s growth was also due to low base effects last year.

“We anticipated these results precisely because last year, there was a contraction in spending because of the (Supreme Court) ruling in DAP,” Neri said in a phone interview.

“I think we would have to see one or two more months of growth in spending before we can truly say that we have turned the corner,” he said.

The government has come under fire for underspending which analysts said had put a dent on economic growth. This was made worse by a high court decision in July last year that declared the disbursement acceleration program (DAP) unconstitutional.

The DAP was conceived in 2011 as a way to pump prime the economy by re-allocating funds from non-performing agencies. The high court said only the legislature has such power, cautioning the state from spending since then.

This, in turn, has resulted in economic growth slowing to 5.3 percent as of the first semester this year.

 “Hopefully, the higher spending so far will offset the effects of El Niño on growth,” Neri said.

The Aquino administration has fallen below its deficit target since 2011, official figures showed.

In 2011, deficit fell to two-percent of gross domestic product (GDP), way below the 3.2-percent target that year. It was followed by 2.3 percent, 1.4 percent and 0.6 percent of GDP in 2012, 2013 and 2014, respectively.

The deficit-to-GDP ratios in those years fall below the 2.6 percent target in 2012 and two-percent goal in 2013 and 2014, DOF data showed.

Deficit-to-GDP is key measure of how well the government spends and collects revenues as the economy expands.