Budget deficit breaks 2019 record but spending hardly impresses
MANILA, Philippines — The Duterte administration’s budget deficit breached last year’s record level in just 7 months but highly as a result of faltering revenues rather than a warranted surge in disbursements from a costly pandemic response.
The deficit— which means spending surpassed collected revenues— nearly doubled to P140.2 billion in July, widening the seven-month tally to P700.6 billion, Bureau of the Treasury reported on Wednesday.
The January-July figure already beat the record P660.2 billion budget gap posted for the entire 2019, putting the shortfall on track to the yearend government forecast of P1.82 trillion.
Broken down, data showed dwindling revenues, rather than an expected aggressive spending, widened the deficit, disappointing economists which have long pushed for a convincing fiscal stimulus to propel economic recovery.
“It would be good to know which agencies had low levels of spending compared to last year. At this time, one would expect that all government spending should be in full swing for these are much needed and top priority,” Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said in a text message.
“Again, this may actually be expected because of the usual difficulties in disbursement or absorptive capacity,” Asuncion added.
In July, expenditures rose 10.4% year-on-year, but actual spending from agencies went up slower by 9.3% annually. At that level, the so-called “productive spending” increased at its slowest pace since February’s 2.3%, or before the outbreak erupted into pandemic proportions.
The balance went to debt interest payments that jumped 16.5% on-year, data showed.
Treasury, on its report, still highlighted the year-on-year spending increase which, it said, was “boosted by the implementation of various COVID-19 rehabilitation and recovery measures.” In July alone, the agency said higher disbursements were driven by funds released for the second tranche of social amelioration program by the social welfare department.
For the first 7 months, spending accelerated 23.8% year-on-year, with agency disbursements rising 26.1%, and interest payments on liabilities up 6.9% annually. Total spending is projected to rise 14.2% by yearend.
Revenues resume decline
Meanwhile, following a brief surge in June due to income tax payments deadline, revenues resumed falling last month by 11.2% year-on-year even with businesses reopening after stringent lockdowns in Metro Manila and neighboring areas were lifted.
Broken down, the Bureau of Internal Revenue, which accounts for 80% of tax revenues, decreased collections by 11.8% from a year ago, while Customs earnings slumped 8.84% “weighed down by disruptions to trade caused by lockdown,” Treasury said. Non-tax revenues slipped 18.7% year-on-year.
As of July, revenues shrank 6.8% from last year, with BIR and Customs collections sinking 10.5% and 15.3%, respectively, data showed. For the entire year, revenues are seen to drop 19.7%.
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