Gov't debt drops further in September 2016

MANILA, Philippines – The national government’s debt levels dropped further in September as a robust economy and increased spending offset revenue losses, according to the Department of Finance (DOF).

“Debt management measures led to the continuing drop in the Debt to GDP ratio to 44.2% as of September 2016, an improvement from end-2015 ratio of 44.7%,” Finance Undersecretary and chief economist Gil Beltran said in a report to Finance Secretary Carlos Dominguez III, in a release Friday, December 2.

Beltran noted that the government debt as a proportion of GDP had continually dropped from 52.4% in 2010 to 44.7% in 2015 and he projected this trend to continue to fall to around 35% by the end of the current administration in 2022.

The drop in the debt ratio comes as nominal debt has risen with the Bureau of Treasury reporting that the government’s outstanding debt reached P6.087 trillion as of September, higher compared to the previous year, which the DOF attributed primarily to the weaker peso against the US dollar and other currencies.

Economic growth so far this year has outstripped expectations and Beltran predicted that “strong fiscal fundamentals will continue to underpin robust economic growth during the rest of the year.”

Increased spending

In the first 3 quarters of 2016, Beltran noted that increased public spending contributed 0.87 percentage points or 12.4% of the 7.0% GDP growth.

A large bulk of the expenditure growth, he pointed out, went to public works construction, which rose 30.5% in real terms, while the proportion of the government’s interest payments to its total expenditures dropped to 13.4% during the same period, compared to 13.9% in 2015.

Government expenditure exceeded nominal GDP growth in the first 9 months of the year as expenditures increased by 14.1% while GDP growth for the same period came in at 7.0%.

Likewise, expenditure effort rose to 17.96% of GDP from 17.09% last year.

The increased spending helped offset loses in government collections which has fallen to 15.9% from 16.8% last year.

Beltran however noted that “excluding oil and rice taxes, revenue would have declined by only 0.16 percentage points.”

Meanwhile, he said the “tax effort stood still at 14.2% as oil revenues continued their downward plunge. However, netting out the effects of the oil price decline and rice, tax effort rose by 0.11 percentage points.”

As for the government’s two main revenue sources, the Bureau of Internal Revenue’s tax effort improved slightly to 11.31% from 11.27%, while the Bureau of Customs’ figure fell slightly to 2.78% as of end-September from 2.81% last year. –