2025 budget deficit swells to P1.58 trillion

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March 4, 2026 | 12:00am

MANILA, Philippines — The government saw a wider budget gap of P1.58 trillion last year, exceeding its programmed deficit despite tempered public spending, which offset lower revenue collection.

The budget shortfall was 4.7 percent wider than the P1.51 trillion gap recorded in 2024, as expenditures slightly outpaced revenue growth, data from the Bureau of the Treasury  (BTr) showed.

Last year’s budget deficit also exceeded the government’s forecast of P1.56 trillion by 0.97 percent based on the Cabinet-level Development Budget Coordination Committee meeting in June 2025.

The BTr said the revenue shortfall was partly cushioned by government spending that fell below programmed levels amid corruption in flood control projects.

The budget deficit, when measured against the gross domestic product (GDP), eased to 5.63 percent last year from 5.7 percent in 2024, “underscoring continued progress in the government’s fiscal consolidation efforts.”

In December 2025 alone, the budget deficit narrowed by nearly five percent to P313.2 billion from P329.5 billion in December 2024.

A budget deficit occurs when government expenditures exceed revenue collections, meaning the state spends more money than it generates.

This year, the economic team aims to bring the budget deficit to P1.61 trillion and cut the deficit-to-GDP ratio to 5.3 percent.

Government expenditures rose by 1.8 percent to P6.03 trillion in 2025 from P5.93 trillion in 2024, outpacing revenue growth.

This was due to higher allocations for the National Tax Allotment to local government units, interest payments and personnel services expenditures, which offset reductions in subsidies to state-run firms and other primary expenditures.

Despite this, expenditures remained below the programmed P6.08 trillion target by 0.85 percent, due to the “proactive fiscal management, including stricter oversight on infrastructure projects linked to corruption scandals.”

Primary expenditures were up 0.08 percent to 5.17 trillion, while interest payments rose by 13.2 percent to P864.1 billion.

On the other hand, government revenues inched up by 0.78 percent to P4.45 trillion in 2025 against the P4.42 trillion in 2024.

Total revenues fell short of the P4.52-trillion program by 1.5 percent, as the P69.8 billion over-performance in non-tax revenues was not enough to offset the P136.8 billion shortfall in tax collections.

Tax collections, accounting for the bulk or 92 percent of the total revenue haul, increased by 7.3 percent to P4.08 trillion last year.

The BIR posted a 9.1 percent increase in full-year intake to P3.11 trillion, driven by stronger collections from corporate income tax, personal income tax and value-added tax, documentary stamp tax and excise tax on tobacco.

However, the BIR fell short of the revised full-year target of P3.22 trillion by 3.41 percent.

Still, the agency said it met the downgraded target of P3.101 trillion.

”The underperformance was partly due to a pause in payments for infrastructure-related government contracts amid investigations into flood control projects, which affected withholding taxes, as well as a temporary suspension of audit operations,” the BTr said.

The Bureau of Customs posted a modest 1.8 percent increase in collection to P932.7 billion last year.

Non-tax revenues plunged by 39.2 percent to P376.3 billion in 2025.

Income generated by the Treasury also sank by 17.7 percent to P233.2 billion due to the base effect of non-recurring windfall receipts in 2024 and the impact of interest rate cuts on income from investments and deposit earnings.

Collection from other offices, including privatization proceeds and fees and charges also slid by 57.3 percent to P143.1 billion.