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Budget swings to deficit in April

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By Beatrice M. Laforga
Reporter

THE national government’s budget balance swung to a deficit in April from a year-ago amid weak tax collections and a surge in state spending for emergency subsidy programs for Filipinos affected by the lockdown, the Bureau of the Treasury (BTr) reported on Wednesday.

The BTr’s cash operations report showed the budget deficit stood at P273.9 billion in April, a turnaround from P86.9-billion surplus recorded in the same month last year and bigger than the P59.5-billion gap in March.

Government spending more than doubled to P461.7 billion last month, from P221.8 billion spent in April 2019.

The Treasury attributed the increase to the release of the first tranche of the P200-billion Social Amelioration Program and the P50-billion wage subsidy program, rehabilitation measures, as well as the disbursement of the P36-billion “Bayanihan Grant” to provinces, cities and municipalities affected by the coronavirus pandemic

Primary expenditures or spending net of interest payments stood at P439.8 billion in April, rising 121.81% from P198.3 billion a year ago.

Interest payments (IP) declined by 7% to P21.9 billion in April from P23.5 billion “due to high base effect from April 2019 IP and maturities.”

At the same time, government revenues fell by 39.17% to P187.8 billion in April from P308.7 billion in the same month in 2019, as tax collection plunged due to the postponement of filing and payment deadlines amid the lockdown.

Tax collections, which accounted for 67% of the total, slumped 56.74% to P124.9 billion in April, while non-tax revenues rose 215% to P62.8 billion.

Collections of the Bureau of Internal Revenue (BIR) dropped 61.56% to P90.5 billion in April from P235.5 billion a year ago on deferment of deadlines for income tax payment and filing of other returns.

Finance Undersecretary and Chief Economist Gil S. Beltran in a briefing said excise taxes collected from alcohol and tobacco products plummeted by 99.1% to P200 million in April from P18.1 billion collected in the same month last year.

Only P100 million in excise taxes were collected from tobacco products, while P20 million in taxes were collected from alcoholic drink products, as the lockdown and liquor ban hurt consumer demand.

On the other hand, Bureau of Customs (BoC) collections slid 33.38% to P34.4 billion last month on weak collections and a drastic drop in oil prices. Other revenue-generating offices did not collect any taxes in April, against the P1.7 billion a year ago.

For the non-tax revenues, BTr generated P52.8 billion, 405% higher year on year as state-owned firms remitted their dividends and other income. Income of other offices inched up 6.61% to P10.1 billion.

DEFICIT WIDENS
In January to April, the government’s budget deficit ballooned to P347.9 billion compared with the P3.4-billion gap recorded in the same four-month period last year.

April’s spending surge pushed overall expenditures to reach P1.311 trillion in January-April, up 31.12% from the roughly P1 trillion spent the year prior.

Of which, primary spending increased 34.62% to hit P1.17 trillion in the four-month period, while interest payments went up by eight percent to P141.8 billion.

State revenues were still down by 3.36% to P963 billion for the January to April period, with tax revenues slipping 18% year on year to P745.8 billion while non-tax soared by 137% to P217.2 billion

Collections of BIR slumped year to date by 20.52% to P559 billion, while Customs’ revenues slid 7.13% to P179.7 billion. Sin tax collections also dropped 57.1% to P30.6 billion.

Treasury’s revenues tripled to P164 billion in January-April, while revenues from other offices reached P53.2 billion, up 5.78% year on year.

Alvin P. Ang, an economics professor at Ateneo de Manila University, said the budget deficit in April “is expected” due to higher spending and lower tax haul.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said collections by the country’s two largest revenue-generating bodies were “all but nonexistent,” while spending continued to surge as the government sought to contain the fallout from the pandemic.

“Cash outlays, subsidies and expenditures related to healthcare needs pushed spending to bloat and we hope the government continues to throw a lifeline to the now anemic economy until it can get back on its feet,” Mr. Mapa said in a note published Wednesday.

Moving forward, Mr. Ang said the budget deficit will continue to balloon in the coming months, with the economic team projecting it could reach 8.1% of gross domestic product by yearend.

Mr. Mapa said the government should resist going into “austerity mode to ensure that the economic hardship is minimized so that we can get the economy back in form at the soonest.”

“Substantial and targeted spending can also translate to a faster pickup in GDP, which would help limit the widening of the budget deficit-to-GDP ratio as growth outpaces the increase in spending,” he said.

HSBC Economist Noelan Arbis said the country has been “exemplary in keeping a sound fiscal position” but the coronavirus pandemic might push it “into a different direction” in the coming years, with fiscal deficit expected to only decline to six percent of GDP in 2021.

“By our estimates, the Philippines’ fiscal deficit is also unlikely to decline back to its pre-pandemic levels (i.e. 3.2% of GDP), even after the current administration’s term in office ends in 2022,” Mr. Arbis said in a note yesterday.

National government fiscal performance (April 2020)





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