Deficit narrows as spending drops

By Beatrice M. Laforga, Reporter

THE NATIONAL Government’s budget deficit shrank to P44.4 billion in April, following the sharp drop in spending and a base effect-induced spike in revenues.

Preliminary data from the Bureau of the Treasury (BTr) showed April’s fiscal gap was more than six times lower than the P273.9-billion deficit recorded in the same month in 2020, and a 76.8% decline from the P191-billion deficit in March.

This marked the smallest budget deficit in three months or since the P14-billion gap in January.

The Treasury attributed the narrower deficit to base effects, with revenues surging from last year’s extremely low base while elevated spending from last year’s pandemic response dwarfing the April’s expenditures.

Government spending dropped by 27.1% to P336.3 billion last month from P461.7 billion a year ago.

Of which, primary expenditures, which is total spending less interest payments, plummeted by 28.9% to P312.5 billion in April from P439.8 billion a year ago.

The BTr attributed the decline to high base effect last year when the government rolled out a P275-billion relief package that included cash handouts and wage subsidy programs amid the strict lockdown.

Interest payments inched up by 8.86% year on year to P23.8 billion because of higher coupon payments for reissued Treasury bonds.

Meanwhile, overall revenues surged by 55.46% to P291.9 billion in April from P187.8 billion the year before, when the Bureau of Internal Revenue (BIR) deferred the filing of annual income tax returns (ITR).

This year, the BIR did not extend the deadline for 2020 ITR filing.

Tax revenues, which accounted for 91% of the total, more than doubled to P272 billion from a year ago’s P125 billion. This was driven by the 142% year-on-year spike in BIR collections to P219 billion and 50% rise in Customs revenues to P51.8 billion. Other tax-collecting agencies generated P1.2 billion, compared with zero collections a year ago.

Revenues from non-tax sources slid 68.4% to P19.9 billion, largely due to the 85% decline in BTr’s revenues to P9 billion. State-owned firms were asked to declare their dividends early last year as the government scrambled to source funds at the height of the pandemic.

This was offset by the 140% surge in income from other non-tax sources such as fees and proceeds from privatization activities to P10.8 billion.

From January to April, the budget deficit was flat at P365.9 billion from P360 billion a year ago amid muted growth in expenditures and revenues.

Total expenditures inched up by 3.3% to P1.35 trillion in the four-month period. Primary spending hit P1.2 trillion, up 3% year on year, while interest payments grew 6% to P150 billion.

Meanwhile, overall revenues went up by 3.95% to P988.4 billion, as the 20% surge in tax revenues offset the 56% decline in non-tax income.

Tax collections grew to P898.1 billion, with the BIR experiencing 23% growth in revenues to P688.7 billion, while Customs reported 11.8% increase to P201 billion.

Other tax-collecting offices generated P8.4 billion in those four months, up 29% year on year.

Income from non-tax sources fell 56% to P90.3 billion. BTr’s income dropped 71.46% to P48.4 billion while other offices booked 17% growth to P41.9 billion.

“Higher revenues may be one-off because April is usually personal income tax time. [The same is true for] expenditures because of the fiscal stimulus implementation in the same period last year,” Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc., said via Viber.

Meanwhile, the narrower budget deficit bodes well for the country’s outstanding debt since this will limit new government borrowings moving forward, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

“However, the reluctance to bolster economic growth momentum via increased spending may cap growth prospects of the economy, which could potentially impact the debt-to-GDP ratios negatively,” Mr. Mapa said in an e-mail.

The government is looking to raise P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 9.4% of gross domestic product.