National government’s budget gap widens to P1.2T as of end-October

The national government saw a wider budget deficit as of end-October this year as state spending surpassed the gain in revenue collections, data released by the Bureau of the Treasury (BTr) showed Thursday.

Treasury data showed the government posted a budget shortfall of P1.203 trillion, wider by 27.94% compared to the P940.6-billion deficit posted as of end-October 2020.

The budget gap is at 65% of the government’s P1.9-trillion deficit ceiling for 2021.

In October alone, the fiscal shortfall was P64.3 billion or 4.77% higher than October 2020’s P61.4 billion.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the wide year-to-date budget deficit was due to higher long-term interest rates that increased the country's interest payments on debts as well as the recent lockdowns earlier this year that reduced tax revenue collections.

Expenditures

The national government’s disbursements as of end-October 2021 amounted to P3.7 trillion, up 11.51% from P3.3 trillion in the same period last year.

Interest payments during the period increased by 10.70% to P370.9 billion from P335 billion year-on-year.

Meanwhile, primary expenditures totaled P3.3 trillion, up 11.61% from a year earlier.

“Increased government spending for COVID-19 vaccines/booster shots, which could be recurring in nature in the coming months/years, as well as on related preparations/logistics including for testing, quarantine/healthcare facilities, among other would still add to the budget deficits and government borrowings/debt, going forward,” Ricafort said.

“However, further measures to re-open the economy with the shift towards Alert Level System nationwide by November 2021, resulting in the shift to granular/smaller lockdowns that entail less government expenditures and more tax revenue collections, would eventually allow greater capacity for many businesses/industries in terms of higher production, sales, net income, employment/jobs, and other business opportunities, thereby increasing the government’s tax revenue collections and help in narrowing the country’s budget deficit in the coming months,” he added.

Revenue

State collections as of end-October this year stood at P2.5 trillion, up 5% from P2.4 trillion a year earlier.

The cumulative collection for the first 10 months of 2021 is equivalent to 86% of the government’s P2.9 trillion collection goal for this year.

The Bureau of Internal Revenue (BIR) collected P1.7 trillion during the period, higher by 6.83%. The BIR’s year-to-date collection is already 82% of the P2.1-trillion target.

The Bureau of Customs (BOC), on the other hand, collected P525.4 billion, up 17.1% representing 85% of the P616.7-billion goal for the year.

The BTr, likewise, saw a 45.07% decline in collections to P114.5 billion due to the high base effect of last year’s remittances in compliance with the Bayanihan to Heal as One Act.

Collections from other offices or non-tax including privatization proceeds, fees, and charges amounted to P129.7 billion, up 23.92% year-on-year.

“There is a delicate balance between stimulating economic growth and sustaining fiscal management performance, in terms of maintaining the country’s relatively favorable credit ratings in able to help lower borrowing costs and improve financing terms for the country, as favorable credit ratings also increases the availability of loans/credit from a bigger roster of international creditors/investors, especially in financing various COVID-19 programs as well as for various economic recovery programs from COVID,” Ricafort said.

“Hopefully, new COVID-19 cases would ease further with the continued increase in COVID-19 vaccine arrivals and rollouts, thereby would help justify further reopening of the economy towards greater normalcy, while also considering the capacity of the healthcare system,” he said. — VBL, GMA News