Pandemic response widens budget deficit to new record in April
MANILA, Philippines — An expected surge in spending and a drop in revenues last month did not only spoil a typical budget surplus in April, they also widened the deficit to a new record-high.
The deficit, which indicates the government spent beyond its means, widened to P273.9 billion in April, a massive reversal of last year’s P86.9-billion budget surplus, the Bureau of the Treasury reported on Wednesday.
The monthly budget gap was the widest on record since the restoration of democracy in 1986, surpassing the December 2019 budget gap, a result Treasury attributed to the “adverse impact” of the coronavirus disease-2019 (COVID-19) pandemic.
The latest figures were to be expected as a combination of higher spending and lower revenues tampered with the government’s prized balance sheet, which before the pandemic was getting buoyed by sustained revenue collection and a manageable spending.
But COVID-19 messed with the Duterte government’s budget plans and in April, the effect of the outbreak and lockdowns meant to put the virus under control, was already obvious. “The battle-cry now for the government should be ‘whatever it takes’ with the government moving past austerity mode to ensure that the economic hardship is minimized…,” said Nicholas Antonio Mapa, senior economist at ING Bank in Manila.
Last month alone, spending jumped by more than double to P461.7 billion due to disbursements related to cash aid programs to the poor and displaced workers. While the Treasury did not indicate how much spending did the programs add in April, P100 billion was allocated for subsidy to poor families alone although those were not all spent last month.
Broken down, spending by state agencies for their operations and programs rose 121.8% year-on-year to P439.8 billion. Debt interest payments declined 7% to P21.9 billion, data showed.
On the flip side, revenues slipped 39.2% annually to P187.8 billion last month, a direct result of lack of consumption and business activity in Luzon where an island-wide lockdown was enforced from March 17 to April 30.
By collecting agency, revenues raised by the Bureau of Internal Revenue (BIR) plummeted 61.6% year-on-year to P90.5 billion after the bureau pushed back the deadline on filing income tax returns from the mandated April 15 to June 14 to offer reprieve to taxpayers stuck at home. In the past, income taxes during the month lifted revenues in April and helped the government record a budget surplus.
Meanwhile, the Customs bureau raised P34.4 billion last month, down by a little more than a third from same period a year ago.
High spending needed for growth
From January to April, the budget deficit already widened to P347.9 billion, equivalent to 22.3% of the revised deficit cap of P1.562 trillion for the year. The amended deficit limit is equivalent to 8.1% of GDP, which if realized, will also be the widest on record.
For Mapa however, a wider deficit is the least of government’s problems now, especially with the economy requiring a boost following a 0.2% contraction in the first quarter. By end-June, the government expects the Philippines to enter a technical recession, defined as two succeeding quarters of negative growth.
“Prevention is always better than cure, and the cost of preventing an economy from freefalling at the onset will be less than digging the Philippines out from an all-out economic depression,” he said in an online exchange.
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