Gov’t debt’s share in GDP declines

The share of the government’s debt to the gross domestic product (GDP) further declined to 41.87 percent at the end of the first quarter as the economy sustained strong growth even as spending on public goods and services slowed.

In a report to Finance Secretary Carlos G. Dominguez III, Department of Finance chief economist and Undersecretary Gil S. Beltran said the debt-to-GDP ratio at end-March improved from 42.06 percent a quarter ago and 43.56 percent a year ago on the back of “fiscal reforms, including debt management reforms.”

“Interest payments as a ratio of GDP, expenditures and revenues all declined by 0.25, 1.42 and 3.01 percentage points, respectively,” Beltran added.

Last week, the government announced that the GDP grew 6.4 percent year-on-year in the first quarter, the slowest quarterly growth since the 6.3 percent posted in the fourth quarter of 2015. The first-quarter GDP growth was nonetheless next to China’s 6.9 percent and surpassed those of most emerging Asian economies.

GDP expansion in the first three months outpaced the 4.9-percent year-on-year increase in the government’s outstanding debt to P6.19 trillion as of end-March.

Beltran said that as the country’s two biggest tax agencies—the bureaus of Internal Revenue and of Customs—saw their revenues jump by double-digits from January to March “due to rising tax-collection efficiency,” the tax effort or share of tax collections to GDP also improved to 13.41 percent from 12.99 percent a year ago.

“Tax revenues grew by 12.8 percent [in the first quarter], with BIR collections rising by 12.2 percent and BOC collections rising by 15.0 percent, both higher than the 9.2-percent nominal GDP growth. However, the BOC lagged slightly behind the 24.1-percent rise in imports (in peso terms). This is due to higher percentage of non-dutiable and non-VATable imports,” Beltran said.

Including non-tax collections, the government’s revenue effort likewise inched up to 14.89 percent during the first quarter from 14.63 percent last year.
However, expenditure effort declined to 17.21 percent at end-March from last year’s 18.07 percent, hence “slowing its contribution to GDP growth,” according to Beltran.