Widening fiscal deficits reflect hiked spending

By Riza Lozada

The fiscal balance for 2016 reflected the ramped-up spending of the Duterte administration in its effort to catch up with the huge underspending during the previous administration that limited the economy’s growth potential.

Finance Secretary Carlos Dominguez III said the higher gap in the government’s budget last year was not a bad turn of event as it allowed the administration to immediately face and address problems on infrastructure, human capital and social protection.

The Bureau of Treasury (BTr) reported the 190-percent year-on-year jump in bud­get deficit to P353.4 billion, from 2015’s P121.7 billion. However, the budget deficit was less than the P388.9 billion programmed for 2016.

Spending rose by 14 percent to P2.549 trillion last year, from the previous year’s P2.23 trillion. Rev­enues grew 4 percent to P2.195 trillion from 2015’s P2.109 trillion.

In a statement, Domin­guez said the budget gap last year was well within the government target of 2.7 percent of the gross do­mestic product (GDP).

He said higher spend­ing on infrastructure, human capital and social protec­tion was aimed at ensuring the domestic economy’s high growth, encourage more investments and cre­ate jobs, fast-track pover­ty reduction, and allow the country to be a middle-in­come economy by 2022.

“This major policy shift, in turn, has allowed the na­tional government to keep the domestic economy on the uptrend despite global market volatility,” he said.

With the increase in budget deficit, Dominguez stressed anew the need to approve the proposed Comprehensive Tax Reform Program (CTRP) to have the funds for higher require­ments of the economy and make growth “a truly inclu­sive one.”

The first package of the CTRP calls for a cut in personal-income tax rates, which in turn will be coun­tered by an increase in ex­cise tax for vehicles and oil products and the 12-per­cent value-added tax (VAT).

The Bureau of Internal Revenue (BIR), which col­lects around 70 percent of state revenues, could only manage with P1.567 trillion, which was 3 percent lower than the P1.62-trillion tar­get.

Collections by the Bu­reau of Customs (BOC), another major collect­ing agency, amounted to P396.4 billion or 3 percent lower than its programmed P409-billion revenues.

Last December alone, revenues rose 0.5 percent to P165.3 billion compared with the P164.6-billion tar­get. It was also higher than the P163.5 billion revenues same month in 2015.

Of the total, the BIR contributed P117.2 billion, or 6 percent higher than its P110.1-billion target for the month and 10-percent up from year-ago’s P106.3 bil­lion.

BOC’s revenues amounted to P34.8 billion, or 5 percent lower than its programmed P36.5-billion collection but 8 percent lower than the P37.8 billion in December 2015.

Expenditures in 2016 went up 14 percent to P2.549 trillion, as against the P2.23 trillion in 2015. However, this was 4 per­cent shy of the P2.645-tril­lion programmed spending for the year.

Last December alone, spending reached P283.6 billion, or 8 percent low­er than the P307.9 billion programed, but 19 percent higher than the P238.6 bil­lion in December 2015.

Dominguez said that with the Philippines “near­ing its demographic sweet spot,” the government needed to sustain econom­ic development to create enough jobs for the ever-in­creasing ranks of young Filipinos joining the work force.

He added that under the Duterte administra­tion, the government is spending big not only on infrastructure and social protection for the poorest families, but also on ed­ucation, health and skills training in order to prime the country’s youth for the challenges of a globally competitive job environ­ment.

Dominguez stressed the urgency for the gov­ernment to improve the job-related skills of young Filipinos, saying the ev­er-expanding labor force is a comparative advan­tage that can make the Philippines catch up with its more vibrant Southeast Asian neighbors and to best compete with them for foreign investments.

“ I n v e s t m e n t – l e d growth creates meaningful employment. It draws our younger workers into jobs that require globally com­petitive skills. It allows us to optimize assets that are scarce like land. It draws us to our advantages like a young labor force capable of learning and doing new things,” Dominguez said.

“Our population is nearing a demographic ‘sweet spot’ where mil­lions of young Filipinos will be joining the workforce. We need to train them in the high skills required for a 21^st-century economy,” he said.

“To produce invest­ment-led growth, however, we need to rapidly upgrade our infrastructure. After many years, of spending less than our neighbors for quality infra, we now face a huge backlog that this administration aspires to close in the medium term,” Dominguez said.