Budget gap swells to P560B in 1st half

THE National Government’s budget deficit ballooned to P560.4 billion in the first half of 2020, as pandemic-related expenses surged amid a decline in tax collections, the Treasury said.

Data from the Bureau of the Treasury (BTr) released on Wednesday showed that the budget deficit swelled by 1,214% in the January to June period, from the P42.6-billion gap recorded during the same period a year ago. It was also 25% lower than the P751-billion deficit programmed for the period.

This as the fiscal gap swung to a P1.8-billion budget surplus in June, from a P41.8-billion deficit logged a year ago.

State revenues jumped 50% to P351 billion in June from P234 billion a year ago, thanks to a 54.56% increase in tax collections.

Tax revenues stood at P325.4 billion in June, as the Bureau of Internal Revenue’s (BIR) collections surged 79% to P283 billion. The income tax payment deadline fell in June this year, as the lockdown forced the government to extend it several times from the original April 15 deadline.

“BIR’s strong performance for the period was attributed to the collection of the 2019 income tax dues during the month as well as the resumption of economic activities due to the easing of some quarantine restrictions,” the BTr said.

On the other hand, the Bureau of Customs (BoC) saw a 17% drop in collections to P42.6 billion due to the impact of the lockdown.

Revenues from non-tax sources totaled at P25.6 billion last month, with BTr’s income rising 5.85% to P11.3 billion and those from other offices increasing by 12.64% to P14.3 billion.

The BTr attributed this to higher remittances from state-owned firms; dividends from stocks held by the government; and the reversion of P5-billion unused funds from the wage subsidy program that ended in June.

On the other hand, state spending jumped 26.65% to P349.2 billion in June from P275.7 billion a year ago. Primary spending — net of interest payments — climbed by 30.42% to P322 billion, while interest payments slipped by 5.3% to P27.6 billion. The BTr said disbursements increased mainly on subsidies extended to Philippine Health Insurance Corp. and the National Housing Authority.

HIGHER SPENDING
Year to date, the budget gap widened as the government ramped up spending in order to boost the country’s healthcare capacity and provide relief to sectors most affected by the pandemic.

State spending jumped 26.63% to P2.014 trillion in the first half from P1.59 trillion spent a year ago, but still short of the P2.203-trillion target. The BTr attributed the higher expenditures to the release of emergency cash handouts to poor and low-income families.

Operating expenses were 29.5% higher at P1.826 trillion but still missed the P1.995-trillion target by 8.48%. Interest payments were up 4.22% to P187.7 billion but fell 9.47% short of the P207-billion goal.

As a percentage of revenue and expenditures, interest payments in those six months stood at 12.91% and 9.32%, respectively, inching up from 11.64% and 11.32%, respectively in the same period last year.

At the same time, revenue collection slipped 6.09% to P1.453 trillion in the January to June period. Tax collections dropped 11.9% to P1.216 trillion, although this was partially offset by a 42% rise in income from non-tax sources at P236.9 billion.

However, the revenues still exceeded the downgraded P1.452-trillion target for the six-month period by 0.12%, with tax haul surpassing its P1.198-trillion goal for the period by 1.53% and earnings from non-tax sources missing its P254-billion target by 6.53%.

Expecting a severe economic downturn, the Development Budget Coordination Committee (DBCC) lowered its revenue projections to P2.613 trillion for 2020, P2.929 trillion for 2021, and P3.271 trillion for 2022.

In the first half, taxes collected by the BIR slipped 10.31% to P956.4 billion, but 2.45% higher than the revised P933.5-billion target.

Customs’ six-month collections were also lower by 16.47% to P253.1 billion, falling short of its P254.2-billion goal.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the surplus in June could be temporary as the government is widely expected to ramp up spending in the coming months to pump-prime the economy.

“As for below-target spending in (the first half), this is the government being prudent and making sure that spending is manageable relative to revenues; the funding response ideally should be larger but I think there is also the need to manage fiscal dominance and complement the accommodative monetary policy environment set by the central bank,” Mr. Roces said on Wednesday via e-mail.

For Ruben Carlo O. Asuncion, chief economist at the UnionBank of the Philippines, Inc., the widening of the budget deficit will likely depend on the amount of the government’s stimulus package.

“The government has yet to roll out its fiscal stimulus package that is meant to support the flailing economy due to the COVID-19 spread. Once a consensus is reached on a fiscal measure, we may see a deficit growing in the coming months,” Mr. Asuncion said in an e-mailed response to questions.

Several stimulus measures are currently pending in Congress, such as the P140-billion Bayanihan 2 bill and the P1.3-trillion Accelerated Recovery and Investments Stimulus for the Economy bill.

Mr. Asuncion noted the government spending will be a “key component” in reviving the economy.

“Even with the rising COVID-19 infections, construction and infrastructure development activities have to adjust accordingly to help keep the economy moving and eventually stay afloat,” Mr. Asuncion added.

Latest data showed infrastructure spending fell 36.7% to P38.9 billion in May from P61.5 billion in the same month last year, dragging the year-to-date figure to P235.2 billion, down 12.2% year on year.

The economy is projected to shrink by 2-3.4% this year. — Beatrice M. Laforga