Tax collection by the Bureau of Internal Revenue and Bureau of Customs remained sluggish in October, amid the economic slowdown. COMPANY HANDOUT

THE government’s budget deficit swelled in October, bringing the 10-month gap to nearly P1 trillion as state revenues remained weak and spending continued to decline even as economic managers pledged to ramp up spending to stimulate the economy.

Latest data from the Bureau of the Treasury (BTr) showed the budget gap rose by 24.56% to P61.4 billion in October. This brought the year-to-date shortfall to a record-high of P940.6 billion, up 170% from the P348-billion deficit seen in the same period last year.

In 2019, the budget deficit reached P660.2 billion. Economic managers estimated that the budget gap will hit P1.815 trillion this year or equivalent to 9.6% of gross domestic product (GDP).

Broken down, overall spending went down for the second straight month last month by 6.84% to P290 billion from P310.8 billion in October 2019. The decline, however, eased from the 15.45% annual contraction seen in September.

“This is largely attributed to the base effect of the one-off pension differential releases for the military and uniformed personnel (MUP) in October last year, as well as the expected lower capital outlays during the year because of the pandemic,” the BTr said.

The weak performance was due to lower primary spending — or expenditure less the interest payments —  which dipped 7.79% to P267.5 billion. This was tempered by the 6.5% increase in interest payments to P22.1 billion.

“The decline in capital expenditures is mainly attributed to the discontinuance and realignment of some capital outlay projects this year pursuant to the Bayanihan I law, and to the delays brought about by the COVID-19 lockdowns,” the BTr said.

Revenue collections also slid by 12.75% to P228.2 billion in October, the seventh consecutive month of year-on-year contraction or since April. To recall, nearly all businesses were shut when Luzon was placed under an enhanced community quarantine in mid-March.

Tax revenues dropped by 14% to P203.8 billion, while a 1.84% uptick was seen in non-tax sources to P24.4 billion.

Taxes collected by the Bureau of Internal Revenue (BIR) fell 14.62% to P152 billion, while those by the Bureau of Customs (BoC) dropped by 12.25% to P50.6 billion. Taxes collected by other offices declined by 37.92% to P1.1 billion.

Meanwhile, non-tax sources rose mainly due to the 31% increase in income generated by other offices through privatization proceeds and fees and charges, among others, to P17.5 billion. The BTr’s profits fell 35% to P6.9 billion because of lower proceeds from the dampened income of Philippine Amusement and Gaming Corp. and Manila International Airport Authority.

Despite October’s slump, overall spending in the first 10 months of the year was still 12.75% higher to P3.312 trillion than the P2.94 trillion spent in the comparable period last year.

“This was propelled by the implementation of various government’s COVID-19 emergency response and assistance programs,” the Treasury said.

Primary spending jumped 13.49% to P2.977 trillion, while interest payments rose 6.54% to P335 billion.

During the 10-month period, revenues fell by 8.41% to P2.372 trillion on the back of a 11.58% slump in tax revenues and a 20% increase in non-tax income.

Tax collections reached P2.059 trillion as of end-October, with BIR revenues down 10.4% to P1.596 trillion and Customs revenues down 15% to P448.6 billion.

Non-tax revenues hit P313.1 billion, buoyed by a 61% jump in BTr’s income to P208.5 billion as state-run firms remitted higher dividends to help boost the government’s war chest against the pandemic. This was tempered by lower profits from other non-tax offices after state operations were disrupted by ongoing restrictions.

The latest spending data was disappointing, as the economy could have used the much-needed stimulus from government spending, said ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa in a note to journalists on Wednesday.

“Expenditures in the latter third of the year have slipped, posting negative growth as authorities hope to preserve fiscal metrics by reigning in expenditures… Nonetheless, we expect the downtrend in spending to be sustained until yearend, depriving the freefalling economy of much-needed fiscal stamina to recover from the pandemic,” Mr. Mapa said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the government needs to ramp up spending, especially releasing the remaining funds from the second stimulus package of the government to boost economic recovery.

Budget documents showed P92.35 billion or 66% of the P140-billion budget allotted under Republic Act No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II) has been released as of Monday. The law will expire on Dec. 19.

“The schedule is already tight and expediency is key right now to have a positive impact on the economic recovery program/efforts,” Mr. Ricafort said in an e-mail.

“More importantly, the timely approval of the P4.5-trillion 2021 national budget would help boost government spending especially on infrastructure spending for 2021, as an important pillar of the economic recovery program to pump-prime/stimulate the economy, alongside with further measures to reopen the economy,” he added.

For Mr. Mapa, the slow economic activity would mean revenue collection would remain sluggish, “but we note that collections have generally outpaced revised projections and targets.” — Beatrice M. Laforga

National Government Fiscal Performance (Oct. 2020)