Angelo Taningco
Economist, Treasury Group

The Philippine fiscal deficit slipped 1% to P350.6 billion in 2017, and has fallen short of the government’s 3% target, consistent with our view, on stronger-than-expected revenue and weaker-than-anticipated spending performances by government. As a share of GDP, the fiscal deficit stood at 2.2%, slightly higher than our 2.0% forecast but lower than 2016’s 2.4%. We maintain our view for the fiscal deficit to widen to 2.7% of GDP this year on the back of government’s infrastructure push, but to fall short of the target amid absorptive capacity constraints. We think market expectations of wider fiscal deficit this year are partly inducing upward pressures on government securities (GS) yields as bigger government spending entails more borrowings (GS issuance).

In December alone, the fiscal deficit amounted to P107.1 billion, the biggest monthly deficit in twelve months. Government revenues surged 35% yoy to P223.1 billion for the month on the back of strong collection performances in both tax and non-tax revenues. Meanwhile, government expenditures climbed 16% yoy to P330.2 billion. In 2017, government revenues and expenditures were up 13% to P2,473.1 billion and 11% to P2,823.8 billion, respectively.

Meanwhile, government under spending—the difference between programmed and actual expenditures— narrowed to a 5-year low of P85 billion in 2017 from P96 billion in 2016, exhibiting efficiency improvements in the utilization of the budget for spending purposes.

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