Metro Manila (CNN Philippines, June 25) — Government spending picked up in May, as agencies are now able to spend for new projects with the 2019 national budget finally in effect.
Data show that the government needs to spend ₱2.996 trillion between April and December, with ₱803.1 billion meant for infrastructure projects under the Department of Transportation and the Department of Public Works and Highways.
The Bureau of the Treasury said state disbursements picked up by 7.8 percent in May to ₱314.7 billion. This marks the first time since February that public spending grew year-on-year.
In a statement, the Treasury attributed the bigger releases for new programs, which comes after President Rodrigo Duterte signed the ₱3.7 trillion national budget last April 15. The four-month delay in passing the spending plan left without funding all new and continuing programs and projects of the government, as agencies were forced to operate using their 2018 budget allocations.
Economic Planning Secretary Ernesto Pernia said last month that fast-tracking the Armed Forces of the Philippines Modernization Program of the Department of National Defense, the school-building program of the Department of Education, and the Health Facilities Enhancement Program of the Department of Health would also help realize the Executive’s “catch-up plan” for spending.
The payment of mid-year bonuses as well as the fresh round of salary increases for government workers also pushed state disbursements higher in May, the Treasury said.
The national government also paid ₱19.7 billion in interest payments for loans, which was 6.8 percent lower than the amounts settled in May last year, data showed.
However, tax collections outstripped the growth in state spending. The government collected ₱317.2 billion in total revenues last month, 22.5 percent higher than a year ago.
The Bureau of Internal Revenue led the pack as it raised ₱204.8 billion taxes, up by a fifth from the previous year’s tally. The Treasury said this is the fastest revenue growth seen so far this year.
The Bureau of Customs likewise saw duties rise by a tenth to ₱58.2 billion, while the Treasury booked ₱35.7 billion in May thanks to cash dividends handed over by government-owned corporations. The regulator Philippine Amusement and Gaming Corp. contributed ₱16.2 billion last month, accounting for half the amount.
Non-tax collections by other agencies, which include penalties and fees, also went up by half to reach ₱16.4 billion.
As a result, the fiscal balance settled at a ₱2.6-billion surplus, which reversed last year’s ₱32.9-billion deficit. This also pulled the five-month tally to an ₱809-million deficit, a far cry from the ₱138.7-billion budget gap recorded at end-May 2018.
As a developing economy, the Philippines operates on a budget deficit so it can pursue new projects even if the amounts needed are beyond what it can currently collect as funding. Apart from tax collections, the government relies on issuing debt papers and foreign loans to carry out big-ticket infrastructure projects.
An analyst said the improving state spending will likely be sustained for the rest of the year.
“Spending in the second half will be rising as the delayed budget gets implemented,” Ruben Carlo Asuncion, chief economist of the Union Bank of the Philippines, said via e-mail.
Asuncion expects the bulk of spending to kick in within the July-September period as the government catches up with delays from the budget approval. However, risks lie ahead.
“Weather disturbances, due to the onset of the rainy season, may hamper projects especially the smaller ones that have been already programmed,” Asuncion added. “The actual implementation and execution of infrastructure projects may further be delayed compared to if these projects have been started before the more challenging rainy season.”
Finance Secretary Carlos Dominguez III has said that the budget delay cost roughly ₱75 billion in lost opportunities, which plunged first-quarter growth to 5.6 percent.
Economic managers, however, are confident that their catch-up plan will help lift economic activity back to the 6-7 percent range in the coming quarters.
Faster implementation of the National ID System, the Pantawid Pamilyang Pilipino Program, unconditional cash transfers, and fuel marking program are also seen to boost budget releases in the coming months to hit the goal, Pernia added.
