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Government budget returns to deficit in February

The Philippine government’s fiscal balance swung back to a deficit in February as revenue collection decreased during the month, data released by the Bureau of the Treasury (BTr) on Monday showed.

The national government’s budget deficit stood at P106.4 billion in February, which compares with the P45.7-billion surplus in January and the P105.8-billion deficit in February 2022.

“The fiscal performance was mainly attributed to a marginal 0.25% decrease in revenue collection, coupled with the flat expenditure outturn during the period,” the BTr said in a statement.

Revenues for the month fell by 0.25% to P211.9 billion, as tax revenues declined by 3.01% to P192.3 billion. The Bureau of Internal Revenue (BIR) posted a 5.29% decline in revenues to P129.4 billion, while those of the Bureau of Customs (BOC) grew by  5.83% to P62.9 billion.

Tax revenues from other government offices declined by 99.23% from P2.2 billion last year.

Non-tax revenues increased by 38.37%, as the BTr income increased by 51.16% to P6.4 billion due to higher remittances from the earnings of the Philippine Amusement and Gaming Corp. (PAGCOR), income from Bond Sinking Fund (BSF) investment, and interest on government deposits.

Collections from other offices, including privatization proceeds and fees and charges, increased by 32.93% to P13.2 billion.

Expenditures posted a 0.01% increase to P318.2 billion, as interest payments climbed by 20.83% to P34.1 billion while others fell by 2.01% to P284.1 billion.

“The growth of disbursements was dampened by the decline of the National Tax Allotment (NTA) shares of Local Government Units (LGUs) resulting from the lower national tax collections in 2020,” the BTr said, citing the impact of the COVID-19 pandemic.

In a separate statement, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael Ricafort said inflation could have hit tax revenue collections in February, as it clocked in at 8.6%.

The central bank expects this to have slowed to the 6.4% to 8.2% range in March, given the rollback in domestic petroleum prices, and lower prices of fruits and vegetables, and chicken and sugar.

“Higher prices/inflation and higher interest rates/borrowing costs may have adversely affected tax revenue collections of the government and could have also increased the government’s overall expenditures, thereby leading to wider budget deficits that could fundamentally add to the government’s overall debt,” Ricafort said.

The Monetary Board of the BSP has already hiked key policy rates by 425 basis points since May 2022, with the latest being a 25-basis point increase that took effect on March 23 to bring the benchmark rate to 6.25%.

“For the coming months, there is still a chance for narrower budget deficit or even a budget surplus during the tax collection season towards April 2023,” Ricafort said.

He cited the impact of the return to normalcy on increased sales and profits, which would fundamentally increase the government’s tax revenue collections moving forward.  —KBK, GMA Integrated News