Philippine Q1 Deficit Rises as Revenue, Spending Grow

The Philippine government’s revenue collections grew 6.90% year-on-year in the first quarter of 2025, reaching PHP 998.2 billion, while expenditures rose by 22.43% to PHP 1.5 trillion, sustaining fiscal momentum despite a widened deficit.

The Q1 budget deficit stood at PHP 478.8 billion, up 75.62% from the same period last year, but still aligned with the PHP 1.5 trillion full-year target set by the Department of Finance.

The Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) led the charge in tax collections, which totaled PHP 931.5 billion, marking a 13.55% year-on-year increase.

The BIR posted a 16.67% growth in collections, generating PHP 690.4 billion, driven by stronger receipts from personal income tax, corporate income tax, value-added tax, excise tax, and documentary stamp tax.

The BOC collected PHP 231.4 billion in the same period, up 5.72% due to higher VAT from non-oil imports and excise taxes on oil and non-oil goods.

Officials credited the sustained tax growth to intensified enforcement campaigns against fake receipts and illicit trade, along with ongoing digitalization and tax facilitation reforms.

Non-tax revenues dropped to PHP 66.7 billion in Q1 2025, down 41.21% compared to last year, largely due to a timing issue with dividend remittances from government-owned and controlled corporations (GOCCs).

Only three GOCCs remitted a combined PHP 27 million in early Q1 2025, versus 18 GOCCs remitting PHP 28.23 billion during the same period in 2024.

However, the Department of Finance expects non-tax revenues to recover in the coming months, with GOCC dividend remittances beginning in May.

On the expenditure side, the government disbursed PHP 1.5 trillion in Q1, or 23.89% of its PHP 6.2 trillion full-year disbursement program, an improvement from 20.36% in Q1 2024.

Higher spending was attributed to increased disbursements by the Department of Public Works and Highways (DPWH) for infrastructure and the Department of Social Welfare and Development (DSWD) for social protection programs.

Substantial fiscal transfers to local government units also drove the expenditure surge, including the National Tax Allotment, the Annual Block Grant to the Bangsamoro Autonomous Region in Muslim Mindanao, and the Local Government Support Fund.

Additionally, the government released PHP 32.8 billion to the Coconut Farmers and Industry Trust Fund, in line with its capitalization schedule.

Primary expenditures, excluding interest payments, reached PHP 1.2 trillion—up 21.96% or PHP 222.6 billion from the previous year.

Interest payments rose 24.88% to PHP 241.0 billion, compared to PHP 193.0 billion in Q1 2024.

As a result, the primary deficit, which excludes interest payments, stood at PHP 237.8 billion for the quarter.

Despite the wider deficit, the government remains confident in meeting its fiscal program, citing expected improvements in non-tax revenues and a more balanced expenditure rollout throughout the year.