Fiscal gap balloons to ₱1.37T in 2020 with slow COVID-19 response spending, low revenue

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Metro Manila (CNN Philippines, February 26) — The country's budget deficit widened to a record ₱1.371 trillion in 2020, marked by slow spending on COVID-19 response and lower revenue collection amid the pandemic.

The Treasury Bureau reported on Friday the latest figure was below the revised full-year target of ₱1.815 trillion for 2020. The fiscal gap was 7.63% of the country's economic output, also lower than the 9.63% eyed for the entire year.

However, it was more than twice the ₱660.2 billion logged in 2019, or 3.38% of gross domestic output.

Public expenditures reached ₱4.227 trillion as authorities implemented pandemic response and recovery measures. The Treasury, however, said this fell short of the targeted ₱4.335 trillion, adding that some economic relief measures under ‘Bayanihan 2’ are still ongoing.

The bureau also said government spending fell below target from January to September 2020, with disbursements down by ₱246.2 billion.

To recall, President Rodrigo Duterte extended this January the shelf life of 'Bayanihan 2', which set aside ₱165.5 billion for pandemic response and recovery. 

Interest payments grew to ₱380.4 billion, 11.31% higher than the year prior as the state borrowed more domestically until the third quarter.

Meanwhile, revenue last year reached ₱2.856 trillion, almost 9% less than that in 2019. Tax collection, which was nearly 87.7% of total revenue, grew past the revised target but fell year-on-year. Non-tax revenue, on the other hand, exceeded both the full-year program and the figure in 2019.

The Bureau of Internal Revenue collected ₱1.951 billion and the Bureau of Customs ₱537.7 billion. Both agencies breached their revised targets, but the figures were lower than in 2019.

The Treasury Bureau income grew by almost 50% at ₱219.7 billion, settling above its target. Higher dividends, other government service income and interest on government-owned and controlled corporations mainly drove the growth, it said.

Other offices saw full-year revenue fall to ₱131.9 billion, 19.17% less than their performance in 2019. However, the figure is higher than the revised target for 2020, the Treasury said.

A budget deficit happens when government spends more than it collects, prompting the state to incur more loans.

National debt stood at ₱9.795 trillion as of end-2020, a slight fall as government settled more domestic loans. Authorities resorted to borrowing to finance higher demand arising from the pandemic.