Budget deficit widens in Feb despite higher revenue take

THE national government incurred a wider budget deficit in February at P116 billion, more than triple the P37.6 billion-shortfall in the same month last year.

The bigger fiscal gap resulted from expenditures outpacing revenues, the Bureau of the Treasury said.

Revenues for the month recorded a 6.15-percent growth year-on-year to P219.6 billion from P206.8 billion in 2020. Meanwhile, expenditures in February spiked 37.27 percent to reach P335.5 billion from last year’s P244.4 billion.

A budget deficit occurs when expenditures exceed revenues.

Tax revenues accounted for 93 percent or P203.3 billion of the total collection in February, reflecting a 7.32 percent increase from P189.4 billion in 2020.

The remaining seven percent of the total came from non-tax revenues amounting to P16.3 billion, lower by 6.51 percent from P17.4 billion in the previous year.

Most of the tax revenues for the month came from the Bureau of Internal Revenue, which collected P154.1 billion. This was an 8.39-percent uptick from last year’s P142.2 billion. With this, the 2-month take by the BIR is now at P336.3 billion, roughly even with last year’s level of P337.1 billion.

Likewise, the Bureau of Customs (BOC) also improved its performance in February as it managed a 5.35 percent year-on-year expansion to P47.2 billion from P44.8 billion in the same period last year. However, its year-to-date collection was still down by 6.17 percent to P94.5 billion from P100.7 billion as of endfebruary last year.

As for non-tax revenues, the Treasury generated P4.6 billion for the month, down by 22.09 percent from February 2020 level of P5.9 billion due to lower collection from Philippine Amusement and Gaming Corp. and investment income. For the first two months of the year, the Treasury collected P23.2 billion, plunging by 32.19 percent from last year’s P34.2 billion.

On government spending in February, nearly 91 percent of the total or P304.4 billion went to primary expenditures, rising by 32.87 percent from P229.1 billion recorded in 2020. The Treasury attributed the increase to equity releases to Development Bank of the Philippines, Land Bank of the Philippines and the Philippine Guarantee Corp. amounting to P45 billion. The figure represents various credit guarantee and lending programs to support industries or sectors affected by the health and economic crises.

For the January to February period, primary expenditures also jumped by 21.14 percent to P532.1 billion this year from only P439.3 billion in 2020.

Apart from this, interest payments for the month almost doubled to P31.2 billion from P15.4 billion last year. The Treasury said the increase is mainly due to coupon payments for the retail treasury bonds issued in 2020 and additional interest payments for the euro bonds issued in the same month a year ago.

Year-to-date, interest payments also inched up by 1.85 percent to P78.2 billion this year from P76.8 billion posted in January to February last year.

The February fiscal gap also pushed the year-to-date deficit to P130 billion, surging nearly ninefold from only P14.6 billion in the same period in 2020.

During the first two months of the year, revenues shrunk to P480.3 billion, lower by 4.22 percent compared to last year’s P501.5 billion.

On the other hand, state expenditure for the 2-month period posted a double-digit expansion of 18.27 percent to reach P610.3 billion from only P516 billion a year ago.

union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion told the Businessmirror the bigger budget deficit in February compared to the same month a year ago “bodes well for economic recovery support.”

“It is reported that 91 percent of total spending went to primary expenditures that includes releases to government financial institutions tasked to support industries and/or sectors affected by the pandemic,” Asuncion told the Businessmirror. “Spending to support economic recovery should continue amid the recent re-imposition of movement restriction, which may further set back economic recovery prospects.”

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the re-imposition of the enhanced community quarantine (ECQ) on the National Capital Region and its surrounding areas (Ncr-plus) could further slow down economic business activities and reduce government’s tax collection. The latter, Ricafort explained, could result to wider budget deficits and more government spending and borrowings that could lead to higher outstanding debt.

“Every week of ECQ in Ncr-plus would require at least P20 billion in additional social amelioration funds, thereby adding to the budget deficit, government borrowings, and overall debt nonetheless,” Ricafort said.

On top of this, he said the need to finance the purchase of Covid vaccines could also lead to the widening of budget deficit and increased overall debt, noting that commercial purchases for Covid-19 vaccines “would be recurring in nature in the foreseeable future.”

For this year, the Cabinet-level Development Budget Coordination Committee is expecting government’s budget deficit this year to rise to P1.78 trillion or 8.9 percent of GDP.

In 2020, the national government’s budget deficit soared to a record high of P1.37 trillion, more than double the previous-high shortfall of P660.2 billion.

The national government’s outstanding debt as of end-february this year has also hit a new record-high of P10.406 trillion.