Angelo Taningco
Economist, Treasury Group

The Philippine government recorded a fiscal deficit for the second-consecutive month in June, amounting to P90.9 billion, which is more-than-doubled its May deficit of P33.4 billion, according to the Bureau of the Treasury’s latest fiscal data released on 24 July. The monthly increase in the fiscal deficit position stemmed from a 21% month-on-month (mom) drop in government revenues-which leveled off at P179.8 billion in June-and a 3% mom increase in government expenditures, which totaled P270.7 billion for the month (Figure 1).

Figure 1: Fiscal Indicators
Jan. 2016 – Jun. 2017
(PHP billion)

 
On a year-on-year (yoy) basis, government revenues and expenditures rose 2% and 23%, respectively, in June leading to a 101% increase in the fiscal deficit for the month. For the month of July, we expect a fiscal deficit to be posted on the back of stronger growth in government spending relative to revenues.

The cumulative fiscal deficit level spanning the first half of the year totaled PHP154.5 billion, which is 7% more than the government’s programmed deficit for the same period and 28% bigger than the first half of last year.

The yoy increase in the year-to-date fiscal deficit level was on account of government revenue growth (7% yoy) overtaken by government spending growth (9% yoy).

Under spending, which is the difference between programmed and actual spending by the government, has narrowed considerably in H1 2017, with the gap only at P6 billion, much lower compared to previous years with its 2010-2016 average at P164 billion (Figure 2). We believe under spending in the second half of and for this full year will continue to be minimized by the government amid its efforts to efficiently utilize its budgetary allocations.

Figure 2: Government’s Programmed & Actual Spending, 2010 – H1 2017
(PHP billion)

 
Despite the sharp narrowing in under spending, the government’s fiscal deficit target of 3.0% of GDP appears to be elusive. We estimate the H1 2017 fiscal deficit to be at only 2.1% of projected GDP, slightly above our full-year forecast of 2.0%.

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