Treasury: Gov’t fiscal deficit down to 7.3% of GDP in 2022

The government’s fiscal deficit relative to the size of the economy declined last year amid higher state collections, the Bureau of the Treasury (BTr) reported Wednesday.

Data released by the BTr showed the national government’s fiscal balance stood at a deficit of P1.6 trillion, down 3.35% from the P1.7-trillion shortfall last year.

This is equivalent to 7.33% of gross domestic product (GDP) in 2022 from 8.60% of GDP in 2021 and below the full-year ceiling of 7.58%.

The Treasury attributed the fiscal outturn to revenue growth of 17.97% which outpaced the 10.35% growth in government spending.

In particular, state revenues totaled P3.5 trillion, up 18% from P3.3 trillion year-on-year. Government spending reached P5.2 trillion, up 10.35% from P4.7 trillion.

“I commend our revenue agencies for their dedication to reaching and even surpassing their targets. Our fiscal performance has shown that we are right on track with our  Medium-Term Fiscal Framework [MTFF] target to reduce the budget deficit to 3.0 percent of GDP by 2028, without compromising growth” said Finance Secretary Benjamin Diokno.

Revenues

Tax revenues accounted for 91% or P3.2 trillion of the total revenue collection, exceeding the target by 2.6% with a 17.4% year-on-year growth.

Non-tax collections made up 9% of the total revenue collection, surpassing the 2022 program by almost 98% or P160.7 billion with a 23.7% year-on-year growth.

Revenue effort, which covers the share of tax revenues, non-tax revenues, and other government agency revenues in relation to GDP, improved to 16.1% from 15.5% in 2021 and is also higher than the 15.2% target.

Tax effort, which is the share of tax collections in relation to GDP, also grew to 14.6% from 14.1% in 2021 and is above the 14.4% target.

With this, Diokno said the Philippines is on track to achieving the goal of raising the tax effort to 17.1% by 2028.

The Bureau of Internal Revenue (BIR) grew its collection by 12.4% to P2.3 trillion, but still behind the P2.4 trillion full-year program by 2.4%.

The Bureau of Customs (BOC) collections climbed to P862.4 billion, up 34% and is 19.5% above the P721.5 billion target for 2022 on the back of efforts to ensure the recovery of deficient duties and taxes, improve tax compliance, tariffs on rice imports, and public auctions of overstaying cargo.

The BTr’s income, meanwhile, reached P154.8 billion, surpassing the P63.4-billion full-year target by P91.3 billion, as well as the 2021 revenue performance by 23.5%.

This was largely driven by higher remittances of dividends on shares of stocks, income from Bond Sinking Fund investments, and interest on national government deposits, the Treasury said.

Total collections from other offices, including privatization proceeds, fees, and charges amounted to P170.4 billion, up 24% year-on-year and is 68.6% higher than the P101.1-billion target due to the one-off remittances from the Department of Social Welfare and Development (DSWD) and Philippine Charity Sweepstakes Office (PCSO) as well as higher collections from the Bases Conversion and Development Authority (BCDA) and Department of Foreign Affairs (DFA).

Expenditures

Government spending, which amounted to P5.2 trillion, grew by 10.35% year-on-year driven by the larger National Tax Allotment shares of local government units in line with the first year of implementation of the Mandanas Ruling; higher capital expenditures mainly from road and transport infrastructure program, and defense modernization projects; personnel services expenses owing to the implementation of the third tranche of Salary Standardization Law V and release of other personnel benefits; as well as interest payments.

The full-year actual disbursements outperformed the P5-trillion target for 2022 by 4.14%, largely due to faster execution of capital outlay projects amid the lowest COVID-19 alert level classification for most parts of the country; implementation of targeted subsidy programs to mitigate the impact of higher food and fuel prices; and payment of compensation and other benefits for COVID-19 healthcare workers in health facilities.

The Treasury said the bulk or 90% of the total disbursements went to primary expenditures amounting to P4.7 trillion, up 9.67% year-on-year.

Interest payments (IP) for 2022 totaled P502.9 billion, up 17.10% from P429.4 billion in 2021 as international and domestic monetary policy tightening to address heightened inflation drove up borrowing rates.

The full-year total interest payments was still 1.90% below the P512.6 billion program, translating to P9.7 billion in savings. — RSJ, GMA Integrated News