Public spending dips in June

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Metro Manila (CNN Philippines, July 22) — Government spending dropped in June, reversing last month's recovery despite available funding.

The Bureau of the Treasury reported on Monday that public spending dropped to ₱275.7 billion from the ₱278.5 billion which the government released in June 2018. Actual disbursements for state projects dropped by 3.1 percent, while interest payments for maturing debt surged by 21 percent to ₱29.1 billion.

In contrast, revenue collections continued to pick up in June. The government raised ₱233.9 billion for the month, up by 4.3 percent year-on-year. Taxes remained the biggest source of funding, with the Bureau of Internal Revenue shoring up ₱157.8 billion, two-thirds of the haul.

Funds remitted to the Treasury enjoyed the biggest lift, rising by 37 percent to ₱10.7 billion due to higher dividends paid by state-run corporations.

The latest tally led to a ₱41.8 billion budget deficit, which is 22.9 percent lower than the ₱54.3-billion fiscal gap recorded in June 2018.

This is the first time since March when the budget balance was back to a deficit, following the impact of the four-month delay in passing the 2019 budget. President Rodrigo Duterte was only able to sign the ₱3.7-trillion spending plan into law on April 15, effectively leaving new and continuing programs unfunded during the first four months of the year.

As a developing economy, the Philippines runs on a budget deficit so that it can start new projects even if the amounts needed are beyond what it can currently collect as funding. On top of taxes, the government relies on issuing debt papers as well as on foreign loans to finance big projects, especially big-ticket infrastructure.

The Philippine economy grew by just 5.6 percent in the first quarter, a four-year low and far from the 6-7 percent goal set by the economic team for the entire year.

For the first six months, government spending stood flat at ₱1.59 trillion compared to the ₱1.604 trillion which agencies spent during the comparable period last year. Budget releases for actual projects dropped by ₱27.9 billion, while debt payments grew by nearly a tenth, data showed.

On the other hand, revenues continued to firm up and reached ₱1.548 trillion as of end-June, up by a tenth versus the ₱1.411 trillion collections a year ago. This led to a narrow shortfall of ₱42.6 billion, just about a fifth of the ₱193-billion deficit recorded during the first semester of 2018.

Economic managers have devised a bold catch-up plan for the remainder of the year, with hopes that this will invigorate state spending and spur faster economic growth.

READ: Gov't keeping up hopes of 6-7% growth this year

Ruben Carlo Asuncion, chief economist at the Union Bank of the Philippines, said the soft spending is still the "consequence" of the delayed budget, which may also impact second-quarter growth.

Asuncion's latest available estimate showed that the economy could have expanded by just 5.9 percent from April-June, but noted that additional data released between now and Aug. 8 could push growth to the 6 percent level.