Budget deficit swells in July as PH spends on coronavirus response

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Metro Manila (CNN Philippines, August 26) — The country incurred a larger funding gap in July as the government was forced to spend more on COVID-19 response despite lower revenue collections, Treasury data showed.

The bureau reported Wednesday a ₱140.2-billion budget deficit for the month, nearly double the ₱75.3 billion shortfall in July 2019.

The wider shortfall came as public spending rose by a tenth to ₱374.7 billion from a year ago, lifted by the release of the second tranche of the Social Amelioration Program. Cash aid worth between ₱5,000 to ₱8,000 is still being distributed to 14.1 million poorest families –– funds meant to provide for their needs during the March to May lockdown.

Other COVID-19 related expenses also added to the expenses, the Treasury said.

State revenues dropped by 11.2 percent, collecting ₱234.5 billion in July against ₱264.1 billion last year. Slower economic activity amid stay-at-home rules meant fewer things and activities to tax.

The Philippine economy in the first half of the year went slimmer by 9 percent compared to the year before as the lockdowns paralyzed businesses, resulting in millions of jobs lost due to COVID-19.

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Tax collections of the Bureau of Internal Revenue slumped by 21.4 percent, while Customs duties slipped by 4.8 percent amid limited international trade.

Still, income from other government agencies saw a surprise increase by 12.4 percent to ₱14.6 billion, boosted by ₱4.3 billion worth of concession fees settled by MPCALA Holdings for the Cavite-Laguna Expressway project.

The sustained fiscal shortfall led to an even wider gap year-to-date at ₱700.6 billion, nearly six times bigger than the ₱117.9 billion deficit as of July 2019. Spending rose by nearly a fourth to ₱2.39 trillion as government sought to curb COVID-19 infections, but the state only raised ₱1.69 trillion in revenues.

The government is prepared to see the budget gap swelling to ₱1.8 trillion or 9.6 percent of gross domestic product for 2020 just to accommodate more spending for coronavirus prevention and cure. The gap is already at 6.52 percent of GDP at end-June, according to the Treasury.

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Another stimulus package worth ₱165.5 billion is expected to be signed into law soon, which seeks to perk up the economy in the next four months.

The government has resorted to more loans from local and foreign sources to support COVID-19 programs as well as other projects in the pipeline for the year.

RCBC economist Michael Ricafort said there is scope to raise revenue collections as quarantine measures are relaxed, but may still not be enough to meet funding needs for more aggressive spending.