The government’s budget deficit worsened in December amid lower revenue and increased spending amid a coronavirus pandemic, according to the Treasury bureau.

The fiscal gap rose by a fifth to P302.6 billion from a year earlier, data from the bureau released on Friday showed. This brought the full-year deficit to P1.371 trillion, more than double the P660 billion in 2019.

Last year’s deficit was equivalent to 7.63% of the country’s economic output, higher than 3.38% in 2019. But it was lower than the 9.63% revised program for the year.

“This is definitely because of the economic impact of the COVID-19 pandemic that directly resulted in closures of micro, small and medium-sized enterprises and lower domestic demand,” Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc. said in a text message. “These, of course, resulted in lower government receipts.”

A deficit occurs when a government spends more than the taxes it collects, forcing the state to borrow and increase debt.

In December, government expenditures rose by 9.46% to P541.1 billion, bringing the full-year spending to P4.227 trillion, 11% higher than a year earlier.

Revenue slipped by 1.95% to P238.5 billion that month. Revenue fell by 8.97% to P2.856 trillion last year from a year ago.

Collections by the Bureau of Customs and other offices dropped by 13.13% and 14.74% to P45.3 billion and P700 million, respectively. Tax collections by the Bureau of Internal Revenue inched up by 0.48% to P163.4 billion.

Nontax revenue also increased by 5.2% to P29.2 billion as revenue from other offices jumped by 30.56% to P20.8 billion despite a 29% fall in Treasury collections to P8.4 billion.

The Treasury bureau traced the lower revenue to tax relief measures meant to ease the burden on consumers.

This year, the Development Budget Coordination Committee capped the fiscal deficit to 8.9% of the economy, with gross borrowings expected to hit P3.03 trillion.

A measure seeking to cut corporate income tax to 25% from 30% may cost the government as much as P250 billion in foregone revenue from 2021 to 2022, according to Finance Assistant Secretary Maria Teresa S. Habitan.

“Although initially it will be negative for national revenue, the longer-term impact may offset the shorter-term receipt shortfall,” Mr. Asuncion said.

The measure, which has been submitted for President Rodrigo R. Duterte’s signature, is expected to allow companies to expand and hire more people, he added.

The government wants to pass at least 14 priority bills before the election season to help to fast-track economic recovery from a coronavirus pandemic.

The Legislative-Executive Development Advisory Council (LEDAC) met a few days ago to discuss the priority measures, Finance Secretary Carlos G. Dominguez told a Manila Times online forum on Friday.

“We agreed on a menu of measures that need to be passed before the election period begins some time in March next year,” he said.

The bills endorsed by the council would be certified as urgent by President Rodrigo R. Duterte, acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said in a mobile phone message. “We will release a list soon.”

The council is made up of 20 members that include Mr. Duterte, Vice President Maria Leonor G. Robredo, Mr. Chua, Mr. Dominguez, and three other Cabinet members, four senators, four congressmen and three members from local governments, the youth and private sector.

Albay Rep. Jose Maria Clemente S. Salceda said among those endorsed by the council were a bill seeking to help distressed small companies, one that will reform property valuation and assessment and another that will simplify the tax structure for financial instruments.

Also on the priority list are proposed changes to the Public Service Act, Retail Trade Liberalization Act and Foreign Investment Act, as well as amendments to Agri-Agra law, proposed Medical Reserve Corps Act and the creation of a Disease Prevention and Control Authority.

“That’s not an exhaustive list of what we are limited to doing for the next few months,” Mr. Salceda, who heads the House ways and means committee, said in a Viber message.

Economic managers expect the economy to grow by as much as 7.5% this year after a record 9.5% contraction in 2020. Mr. Dominguez said economic reform measures could help the country to recover.

“We cannot recover all that we lost in 2020 in one blow,” he said. “It will take us more years to nurse our economy to where it was before the pandemic struck.” — Luz Wendy T. Noble

The Philippine central bank on Friday fully awarded P90 billion worth of 28-day bills at higher rates amid investor preference for retail Treasury bonds (RTBs).

Demand for the short-term securities reached P102.12 billion, more than the P90-billion offer but lower than P154.9 billion a week ago, according to e-mailed auctions results from the Bangko Sentral ng Pilipinas (BSP).

Yields for the central bank’s bills were 1.665% to 1.995%, wider than last week’s auction. This caused the average rate to hit 1.7303%, rising by 6.2 basis points.

“The auction results continue to broadly reflect market participants’ search for yield amid the ongoing offering of RTBs of the Bureau of the Treasury,” central bank Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The government is offering RTBs at a coupon rate of 2.375% from Feb. 9 until Mar. 4, unless ended earlier. The Treasury raised P221.218 billion earlier this month.

Yields in the term deposit facility also picked up on Wednesday.

The central bank uses both its securities and term deposits to mop up excess liquidity in the financial system and to better guide short-term market rates.

“The higher auction yield was also due to a weaker peso exchange rate recently that could lead to high import prices and overall inflation,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said in a text message.

The peso has been weakening in recent weeks as global oil prices rose due to supply disruptions in the US and with gradually increasing demand.