The national government’s budget deficit widened 4.11 percent to P171.4 billion in February from P164.7 billion a year earlier, with strong revenue growth overwhelmed by higher spending, the Bureau of the Treasury (BTr) said.
The report released by the BTr on Wednesday said total government revenues climbed 12.39 percent or P27.8 billion to P251.8 billion in February from P224 billion a year earlier.
Expenditures, however, increased by 8.88 percent or P34.5 billion to P423.2 billion from P388.7 billion in the comparable period.
Persistent fiscal gap
The widening of the budget deficit in February highlights a persistent fiscal gap that needs careful management, John Paolo Rivera, a senior research fellow at the Philippine Institute for Development Studies, said.
“Revenue growth is encouraging, reflecting improvements in tax collection and economic activity, but it is still not enough to offset rising expenditures. Expenditure control is crucial, especially in non-priority areas, but the government must balance this with its commitments to infrastructure, social programs and debt servicing,” he said.
“Ideally, a dual approach (enhancing revenue collection efficiency while keeping expenditure growth in check) is the best path forward. A widening deficit means that the government is likely to rely on more borrowing to bridge the gap,” Rivera added.
Year-to-date
In the year-to-date, the budget deficit swelled by 34.35 percent to more than P103.1 billion from P76.7 billion in the first two months of 2024.
The national government’s total revenue collections and expenditures maintained double-digit, year-on-year growth in January to February 2025, keeping those items “on track” and within the fiscal targets this year, the bureau said.
Revenues in the first two months of 2025 grew 11.32 percent to P718.9 billion from P645.8 billion year-on-year.
Expenditures in the first two months of the year expanded at a faster pace of 13.76 percent to P822 billion from P722.5 billion in January to February 2024.
BIR, BOC, BTr collections
The BTr report said the Bureau of Internal Revenue (BIR) collected P159.7 billion in February, a 15.7 percent improvement from P138 billion generated a year earlier.
“Growth in the BIR’s February collection was primarily due to higher collections from corporate income tax, personal income tax, excise tax on tobacco and alcohol products, value-added tax and documentary stamp tax,” the BTr said.
The BIR sustained double-digit growth the first two months of the year, resulting in a 15.31 percent increase in collections to P514.7 billion from P446.4 billion.
Collections by the Bureau of Customs (BOC) reached P71.8 billion in February, a 1.71 percent increase from P70.6 billion a year earlier.
This brought the BOC’s revenue to P151 billion year-to-date, surpassing by 4.91 percent the P144 billion recorded a year earlier.
“Year-on-year growth in BOC collections for the first two months mirrored the 4.93 percent growth in goods imports for the same period,” the BTr said.
“BOCs’ continuous modernization, border protection, and capacity development efforts have enabled the bureau to maintain its positive performance in the first two months of the year,” it added.
February’s non-tax revenues rose 37.11 percent to P17.4 billion from P12.7 billion year-on-year.
“The increase was partly attributed to the one-off remittance of the Department of Agrarian Reform’s share of penalties imposed on lending institutions for non-compliance with the mandatory Agri-Agra credit requirement under Republic Act 10000,” the BTr said.
Year-to-date non-tax revenue slipped 4.67 percent to P47 billion, from P49.3 billion a year earlier, which the BTr said was partly due to lower receipts from the proceeds of the Malampaya gas field.
The BTr alone generated P7.9 billion in February, a 21.9 percent improvement from P6.5 billion a year earlier.
It said the increase was driven by higher interest income from national government deposits, managed funds and the national government’s share of the profit from the Philippine Amusement and Gaming Corp’s.
The BTr’s total collections of P23.7 billion in the first two months of the year improved marginally by 1.86 percent from P23.2 billion year-on-year.
Collections from other offices comprising other non-tax revenue, privatization proceeds, fees and charges and grants reached P9.5 billion, significantly higher by 53.04 percent from P6.2 billion a year earlier.
Year-to-date collections, however, amounted to P23.4 billion, down 10.48 percent from P26.1 billion a year earlier.
Meanwhile, the BTr said expenditures in February reflected the higher capital expenditures of the Department of Public Works and Highways, particularly progress billings and payment of right-of-way acquisition for various infrastructure projects.
“Higher disbursements recorded in the Department of Health and Department of Social Welfare and Development for their banner health and protective services programs, respectively, also contributed to the growth of February disbursements,” the BTr said.
Of the total monthly expenditures, 88.55 percent or P374.8 billion went to productive spending net of interest payments, indicating a 9.95 percent increase from the P340.9 billion year-on-year.
Year-to-date expenditures of P669.1 billion were up 11.43 percent from P600.5 billion.
Analysts’ take
PIDS’ Rivera said there may be more bond issuances in the local market, particularly in short- to medium-term tenors, given the strong demand for government securities in recent auctions.
Ateneo de Manila University economist Leonardo Lanzona said that despite a widening budget deficit, limiting expenditures might be “problematic” as these are fundamentally investments in infrastructure and social protection.
Given that this is an election year, it is unlikely that the government will reduce these expenditures, he added.
Michael Ricafort, Rizal Commercial Banking Corp. chief economist, said additional tax revenue collections based on existing tax laws or through new tax reform measures and even higher tax rates may be needed.”
“There may also be a need for more fiscal reform measures to reduce government expenses such as rightsizing of the government and tax reform measures to further increase structural, recurring tax revenue collections to narrow the budget deficit and curb additional need for borrowings,” he added.
