Budget gap hits P202 billion in May

THE national government recorded a P202.1-billion budget deficit in May, as spending continued to rise while revenues slumped to multi-year lows amid the pandemic.

The Bureau of the Treasury (BTr) reported Tuesday the government’s budget balance swung to a P202.1-billion deficit from a P2.6 billion surplus in May 2019. However, this was narrower than the P273.88-billion budget gap in April.

The budget gap ballooned to P562.2 billion in the first five months of 2020, from the P809-million deficit a year ago. The January to May deficit already exceeded the P558.3-billion budget gap recorded in 2018, but still below the record high of P620-billion shortfall last year.

The government’s economic team is projecting the budget deficit to hit P1.612 trillion this year or 8.4% of gross domestic product (GDP).

In May, revenues plunged 52.25% to P151.5 billion. BTr data showed last month’s revenues were the lowest since the P138.95 billion generated in February 2016.

Tax revenues declined by 45.34% to P145.2 billion in May. The Bureau of Internal Revenue (BIR) saw a 44% drop in collections to P114.4 billion, while the Bureau of Customs (BoC) generated 47% lower revenues at P30.8 billion. Other offices did not generate any taxes in May, compared to the P2.6 billion they generated in May 2019.

“The agency’s (BIR) weak performance was still due to the effect of the prolonged enhanced community quarantine which prompted the Bureau to further extend its deadline for tax filing and payments to June 14, 2020,” the Treasury said.

Non-tax revenues also slid by 87.8% in May to P6.3 billion, with BTr’s income decreasing by 93% to P2.4 billion. Other offices generated only P3.9 billion in May, down 76%.

Meanwhile, spending climbed by 12.38% to P353.6 billion in May from P314.7 billion a year ago, and 23% lower than the P462 billion spent in April.

BTr said the increase was largely due to the disbursement of the second tranche of the Small Business Wage Subsidy program.

Primary expenditures, spending net of interest payments, rose 13.65% to P335.3 billion in May.

Interest payments dipped 6.69% to P18.4 billion last month.

FIVE-MONTH SLUMP
In five months to May, state revenues fell 16.1% to P1.102 trillion from P1.314 trillion a year ago.

Total tax collections stood at P891 billion in January-May, 24% lower than the P1.17 trillion last year. Broken down, BIR’s collections slipped by 25.84% to P674 billion, while Customs’ collections were 16.37% lower at P211 billion. Other offices generated P6.7 billion, down 34% year on year.

On the other hand, non-tax revenues grew by 47.6% to P211.4 billion in the five-month period, largely due to huge dividends remitted by state firms to the BTr. The Treasury’s total revenues surged 123% to P172 billion during the period.

Year-to-date spending rose by 26.63% to P1.665 trillion.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the 12% rise in state spending in May was “a disappointment,” as expenditures were lower on a month-on-month basis. Last month’s spending dropped by 23% from April’s level.

Mr. Mapa expects the budget deficit to widen further as the government ramps up spending to help mitigate the impact of the coronavirus pandemic on the economy, while revenues may continue its decline on dampened business activity.

“We contend however that the better metric and measure of the fiscal health of the economy is the deficit-to-GDP ratio. At the current year-to-date level, the deficit-to-GDP ratio stands at roughly 3%, well-below the DoF (Department of Finance) threshold of 9% of GDP with seven more months to go before the end of 2020,” he said via e-mail on Tuesday.

He said the deficit-to-GDP ratio provides a “more holistic view” of the country’s fiscal health.

“Increasing spending may indeed translate into a wider deficit but targeted spending to get the economy back on its feet would also address the GDP part of the deficit-GDP equation. Growing the economy faster than the deficit can expand will translate to incomes rising faster than debt and a true situation of fiscal sustainability,” he said.

“Choosing to withhold spending to keep the deficit in check may lead to a downward spiral in terms of economic momentum that can force the deficit-GDP ratio to surge as incomes crater,” he added.

Officials estimated the Philippine economy will shrink by 2-3.4% this year. — Beatrice M. Laforga