December spike pulls 2019 spending beyond target

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The government's catch-up plan for 2019 projects paid off in December, Treasury data showed, pulling full-year releases to a new record high.

Metro Manila (CNN Philippines, February 27) — The government's catch-up plan for 2019 projects paid off in December, pulling full-year spending to a new record high, Treasury data released Thursday showed.

The government spent ₱494.4 billion for the month, a 57.8 percent surge from the amount released in December 2018, the Bureau of the Treasury said.

The state poured bulk of the money on infrastructure projects under the Department of Public Works and Highways, social protection programs of the Department of Social Welfare and Development, and benefits paid to government employees. In particular, select workers received service recognition incentives as well as pension and retirement benefits, while new or vacant positions were filled, the treasury said further.

The December spike propelled full-year disbursements to a record ₱3.798 trillion, higher by 11.4 percent from the previous year's sum. The 2019 releases even surpassed the government's ₱3.77-trillion spending target.

"Expenditures sped up despite the delay in the approval of the 2019 budget as line agencies caught up with spending towards the latter part of the year," the bureau said, referring to a months-long slump early last year as the ₱3.7-trillion spending plan was only signed into law mid-April. This left new and continuing projects unfunded.

READ: 'Politicking' over 2019 budget left more Filipinos poor, unemployed – Dominguez 

The Treasury said "productive" spending rose by 12.3 percent to hit ₱3.44 trillion in 2019, against ₱360.9 billion paid for maturing debts.

Taxes grow

Agencies also shored up even more revenues for the government, but fell short of targets.

Revenues hit ₱243.3 billion in December, which pulled the 2019 tally to ₱3.138 trillion. The amount rose by a tenth year-on-year, but fell short of the ₱3.15 trillion goal set by economic managers.

The Bureau of Internal Revenue (BIR) raised ₱2.18 trillion, short of the ₱2.27 trillion target. The Bureau of Customs also missed its ₱661-billion goal, raising ₱630.3 billion for the year. Other agencies added ₱22 billion, while non-tax collections jumped by almost 9 percent to reach ₱309.7 billion, data showed.

The BIR said lower gains from fuel taxes as well as for sugary drinks pulled down its haul, while Customs attributed the below-program collection to lower import volumes and a stronger peso.

The Department of Finance earlier reported raising ₱269.1 billion in "sin" taxes, drawn from higher duties on cigarettes and alcoholic drinks. A new law imposes even higher taxes on alcoholic drinks and e-cigarettes starting this year.

READ: More Filipinos expect lives, economy to improve in 2020 – SWS 

The 2019 performance ended in a ₱660.2-billion budget deficit, which is a fifth wider than the 2018 fiscal gap. This is also beyond the ₱620 billion deficit ceiling set last year, equivalent to 3.55 percent of the Philippine economy.

The Philippines operates on a budget deficit so that it can start new and high-impact projects even if the funds needed are beyond what it can currently raise. On top of taxes, the government relies on issuing debt papers, as well as foreign loans and grants, to fund big-ticket infrastructure.

Faster growth seen

The stronger-than-expected budget releases in December would likely trigger an upward revision in the official growth figures, ING economist Nicholas Antonio Mapa said.

In a commentary sent to reporters, Mapa said the spending spike could be enough for authorities to raise 2019 growth to 6 percent, better than the 5.9 percent clip announced in January. 

If realized, it would mean that the government hit its tempered 6-6.5 percent growth goal.

However, the analyst said spending should remain bullish in order to offest an expected slowdown this year, as the global novel coronavirus outbreak interrupts trade and tourism.

"With the COVID-19 virus expected to curb household spending in the coming months, we expect the fiscal front to help insulate the economy with strong spending likely to continue in the first half," Mapa said. A fresh interest rate cut from the central bank — following a 25 basis point cut this February — would also support investments, he added.

The ₱4.1-trillion spending plan for 2020 has been signed into law on the first week of January. 

READ: PH economy to miss growth targets until 2022 – World Bank