THE national government’s fiscal balance swung back to a deficit in February, with the gap seen to further widen in the coming months as revenue collections are expected to fall and state spending to ramp up amid the coronavirus disease 2019 (COVID-19) pandemic.

Data from the Bureau of the Treasury (BTr) released on Monday showed the budget deficit stood at P37.6 billion in February, narrower than the P76.4 billion seen in the same month in 2019 and a turnaround from P23-billion budget surplus in January.

February revenues rose 2.35% to P206.8 billion, with tax collections rising 4% to P189.8 billion and non-tax revenues fell 13.03% to P17 billion.

Broken down, the Bureau of Internal Revenue (BIR) saw a 4.79% increase in collections to P142.2 billion in February from P135.7 billion a year ago.

The Customs bureau collected P44.8 billion, up 1.33% year on year, largely due to a slowdown in imports from China due to the coronavirus outbreak.

For non-tax revenues, the BTr saw a 36.25% decline to P5.9 billion “due to lower dividend remittance for the period compared to 2019.”

In February, government spending fell by 12.22% to P244.4 billion from P278.5 billion in the same month last year, which the BTr attributed to base effect since the Internal Revenue Allotment (IRA) of local governments was only released that month instead of January.

Of which, primary spending or expenditures net of interest payments dropped 9.51% to P229.1 billion.

The BTr also attributed the lower spending total to smaller interest payments in February which contracted by 39.32% to P15.4 billion “resulting from maturities and the premium on reissued Treasury bonds.”

Year-to-date, the budget deficit slumped by 54% to P14.6 billion.

Revenues for the January to February period jumped 9.29% to P501.5 billion, of which the BIR collected P337.1 billion (up 5.08%) and BoC collected P100.7 billion (up 8.74%).

Overall state spending rose 5.17% to P516 billion in the first two months of the year, as primary expenditures grew 4.72% to P439.3 billion and interest payments went up 7.79% to P76.8 billion.

“In the coming months, we expect the budget deficit to widen substantially (up to 5% of GDP, gross domestic product) as the Philippines contends with fading tax revenues given the economic impact of COVID-19 and the enhanced community quarantine (ECQ),” Nicholas Antonio T. Mapa, senior economist at ING Bank Philippines, said in an e-mail on Monday.

He expects tax collections to contract in the coming months as “incomes will be curtailed severely and excise tax collections hit” due to the ECQ.

In addition, the government is expected to ramp up spending drastically to shield the economy from the fallout from the coronavirus.

For instance, the government has rolled out the first tranche worth P100 billion of its P200-billion cash aid assistance to low-income families and those in the informal sector. The national government and its local units also implemented relief good operations to feed families stuck at home during the month-long ECQ.

“The formula of stronger spending to offset the loss from consumption and investment activity, coupled with falling revenues will push the deficit to widen but this is the task the government has before them,” Mr. Mapa said.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the country should brace for a larger budget deficit in the coming months as the figures in February report “still do not account fully the effect of the lockdown from the pandemic.”

The government placed Luzon under a month-long ECQ until April 12 to contain the spread of COVID-19.

“With most businesses and with it consumption on lockdown, expect lower revenue in the months to come with lower collections. On the other hand, expenditure will be higher as the government institutes aid packages and other stimulus programs to aid affected sectors, hence a larger negative budget balance,” Mr. Roces said in an e-mail.

“They will have to take it on the chin to keep the economy afloat until our brave frontliners can beat back the virus and then eventually business and consumer sentiment returns,” Mr. Mapa said.

So far, the official budget cap is still at 3.2% of GDP but economic managers projected this could reach 3.6% of GDP before the lockdown was implemented.

However, the National Economic and Development Authority’s (NEDA) estimates showed fiscal gap could widen to 4.4%-5.4% of GDP this year.

According to the Department of Finance, the government could suffer a P318.9-billion drop in revenues if 2020 GDP will contract by one percent and a P286.4-billion decline if the economy will post flat growth, on top of an estimated P14-billion decline in collections due to falling global oil prices.

The government targets to collect P3.49 trillion this year to fund its P4.1-trillion spending plan, with the remaining funds to be sourced from its borrowing activities. The BIR is tasked to collect P2.576 trillion or 78% of the P3.3-trillion target set for the two biggest tax collection agencies, while the Customs bureau is expected to collect P731.235 billion.” — BML