By Beatrice M. Laforga, Reporter

THE NATIONAL Government’s budget deficit tripled to P120.9 billion in August from a year earlier after public spending surged due to subsidies, outpacing a muted rise in revenue amid a coronavirus pandemic, according to the Treasury bureau.

Preliminary data released on Thursday showed last month’s fiscal gap was the least in four months and smaller than P121.2 billion in July.

The government incurs a deficit when it spends more than the money it makes to fund programs that will boost economic growth, especially infrastructure projects. It borrows from foreign and local sources to plug this gap.

Government spending rose by 34.2% from a year earlier to P380.2 billion in August, higher than P377.3 billion in July and the second-biggest annual increase this year after a 37% spike in February.

The Treasury bureau traced the increased spending to pandemic-related expenses such as the P15-billion emergency cash aid given to poor families in Metro Manila, Laguna and Bataan when the cities were placed under a strict lockdown for two weeks.

Subsidy releases to state-run Philippine Health Insurance Corp. (PhilHealth) worth P30.6 billion also drove government spending up.

Of the total, primary spending — spending minus interest payments — climbed by 36.6% from a year earlier to P356.3 billion. Interest payments also went up by 6% year on year to P23.9 billion.

Meanwhile, state revenue rose by 7% to P259 billion in August due to bigger tax collections and income from nontax sources.

Tax revenue went up by 3.1% year on year to P240.6 billion. Bureau of Internal Revenue (BIR) tax collections fell by 1% to P186.1 billion that month, while Bureau of Customs collections increased by a fifth to P53.4 billion.

Coronavirus lockdowns could have slowed company sales, leading to lower tax collections, Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc. said in an e-mail.

Other tax-generating offices posted higher collections last month, with total income rising by 11.5% to P1.2 billion.

Income from other nontax sources also rose by 34% from a year ago to P380.2 billion, with Treasury bureau profit more than doubling to P4.7 billion after agencies returned unused stimulus funds to the national Treasury.

Nontax collections from other offices, which include fees and charges, as well as privatization proceeds, also jumped by 78.8% year on year to P13.9 billion.

The budget shortfall ballooned by 20.4% to P958.2 billion in the eight months to August, the Treasury bureau said.

The eight-month total was half of the P1.856-trillion budget deficit ceiling economic managers had set for the entire year, which was equivalent to 9.3% of economic output.

Overall spending went up by 11% to P2.96 trillion as of end-August, accounting for 63% of this year’s P4.7-trillion disbursement plan.

State revenue growth remained muted, inching up by 3.87% to P2.005 trillion from a year ago, tempered by lower nontax income.

Tax collections, which made up 91% of the total, rose by 9.2% to P1.82 trillion from a year earlier, as BIR’s income went up by 6.6% to P1.39 trillion and Customs revenues increased by 18.7% to P412.3 billion.

“Since government spending depends substantially on tax revenues, muted growth in tax collections can dull government efforts to pump-prime the economy and accelerate economic growth,” Cid L. Terosa, a senior economist at University of Asia and the Pacific School of Economics said in an e-mailed reply to questions.

The Treasury said the BIR must collect an average of P173 billion a month to hit its P2.081-trillion target for the year. Customs needs to raise P51.1 billion monthly in the next four months to hit its P620-billion goal.

Collections of other tax-generating offices rose by 19% to P12.9 billion at the end of August.

Meanwhile, nontax income fell by 29% to P191.8 billion in those eight months mainly due to a 48% drop in Treasury income to P100 billion. Revenue at other offices rose by a fifth to P91.9 billion.

Economists expect the budget shortfall to continue to widen in the remaining four months of the year as the government tries to pump-prime the economy.

“With economic recovery remaining tentative, accelerated government spending will help energize economic activities,” Mr. Terosa said.

Mr. Asuncion said faster public spending is key to stimulating economic activity especially during crises. “However, it is still private consumption and spending that will have to carry the heavy lifting of economic expansion.”

The government should not overly rely on external loans in plugging the budget gap since it could burden the economy, Mr. Terosa said.

State gross borrowings rose by 22% to P2.27 trillion at the end of July. About 81% of the new debts were raised in the local market.