Budget gap widens to P321.5 billion in Q1

MANILA, Philippines — The country’s budget deficit widened to P321.5 billion in the first quarter as the government continued to spend more for pandemic response even as revenues continued to fall, the Bureau of the Treasury (BTr) reported yesterday.

Based on the latest cash operations report of the BTr, the budget gap from January to March was almost four times larger than the P86.2 billion shortfall incurred in the first quarter of last year.

During the review period, revenue collection fell by nearly nine percent to P696.5 billion from P763.1 billion in the same period last year.

These comprise collections by the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), Treasury income and collections from other offices.

Meanwhile, disbursements for infrastructure projects, various social welfare programs as well as the continued implementation of the Bayanihan 2 pushed the total expenditure to P1.018 trillion in the first quarter, outpacing by 19.86 percent last year’s first quarter disbursements of P849.2 billion.

Primary spending during the quarter reached P892 billion, 22.2 percent higher in the comparative period last year, while interest payments reached P125.9 billion, up by almost five percent year-on-year.

As a percentage of expenditures, however, interest payments for the first three months accounted for 12.4 percent, declining from 14.1 percent from a year ago.

Meanwhile, interest payments as a percentage of total revenues increased from 15.71 percent to 18.07 percent, taking into account lower collections over the period.

Netting out interest payments from expenditures, the government registered a primary deficit of P195.6 billion in the first quarter, a turnaround from last year’s P33.7 billion surplus.

The national government’s budget deficit widened to a record high P1.371 trillion in 2020, equivalent to 7.63 percent of gross domestic product (GDP) as the government spent more even as revenues fell amid the pandemic.

As a percentage of economic output, the 2020 deficit was much higher compared with 3.38 percent in 2019 but was still largely within the cap of 7.6 percent of GDP set by the Department of Budget Coordination Committee (DBCC) in December.

For this year, the deficit is projected to reach 8.9 percent of GDP in 2021.

In an interview with CNBC yesterday, Finance Secretary Carlos Dominguez said the government would maintain a high deficit this year as it responds to the public health crisis.

“So we are very careful in managing this, and we are pretty sure that by 2022, we will begin to return to the normal fiscal deficit we have at about 3.5 up to four percent,” he said.

Dominguez said this can be done through a combination of reduction in the disruptions due to the contagion, increase in public and private investments, drop in unemployment, and increase in consumption. Likewise, through the increase in taxable profit and return to solid investments.