The country’s budget deficit in 2021 soared to P1.7 trillion, which is lower than the targeted deficit of P1.9 trillion but still above that of 2020. This is due to higher spending on vaccines, equity infusion in support of government financial institutions lending assistance programs and higher internal revenue allotment shares of local government units.
DESPITE missing the budget deficit ceiling of P1.9 trillion or by 10 percent, the budget deficit in 2021 soared to P1.7 trillion, up by 21.87 percent from the previous year.
The 2021 deficit is equal to 8.61 percent of the gross domestic product, lower than the programmed 9.3 percent but higher than the 7.65 percent in 2020.
In December alone, the fiscal gap ballooned to a record P338 billion, up by 11.7 percent from last year’s P302.6 billion as revenues contracted by 3 percent.
The lower-than-ceiling deficit was because of an unexpected revenue collection improvement by the Bureau of Customs.
Government spending rose by 5.21 percent year on year to P569.3 billion in December.
Primary payments — or total expenditures minus interest payments — grew by 5.08 percent to P542 billion. Interest payments increased by 7.87 percent to P27.3 billion during the month.
Revenues in December reached P231.3 billion, down by 3.03 percent from a year earlier.
Customs collection rise by 32%
Accounting for over 96.6 percent of the total, tax revenues rose by 6.73 percent to P223.4 billion.
Tax collections from the Bureau of Internal Revenue (BIR) slipped by 0.63 percent to P162.3 billion, while revenues generated by the Bureau of Customs (BoC) reached P60.3 billion, or 32.9% higher than last year.
Other tax collecting offices posted P800 million in revenue, up by 28.53 percent from a year earlier.
Nontax revenues from the Bureau of the Treasury reached P4.7 billion, down by 43.41 percent.
The government runs on a budget deficit when it spends more than it makes to fund programs that support economic growth. It borrows from foreign and local sources to plug the gap.
Spending
Spending grew due to “infrastructure and other capital expenditures, continued spending for various recovery measures including vaccine procurement and equity infusion in support of government financial institutions lending assistance programs, as well as higher internal revenue allotment shares of local government units,” the BTr said.
However, this was lower by 1.3 percent than the P4.74-trillion spending program.
Meanwhile, revenue collection last year hit P3 trillion, or 5.24 percent higher than the previous year and better than the P2.9-trillion program.
Tax collections, which represent 91 percent of the total, jumped by 9.4 percent to P2.74 trillion.
The BIR collected P2.08 trillion, up by 6.51 percent year on year, while Customs collections increased by 19.69 percent to P643.6 billion.
BTr income
BTr said its income contracted by 43 percent to P125.3 billion “mainly due to lower dividends on National Government shares of stocks, interest on advances from GOCCs (government-owned and -controlled corporations), and other government service income.”
Nontax revenues from the Treasury plummeted by 42.95 percent to P125.3 billion.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the government should raise its revenue collections after seeing a modest year-on- year decline in 2021.
“There is a need to further increase tax revenue collections, in view of the further reopening of the economy towards greater normalcy,” he said.
UnionBank of the Philippines Chief Economist Ruben Carlo O. Asuncion said fiscal consolidation should be the priority of the next administration.
“Successful implementation of all the presidential candidates’ promises so far would definitely have budget implications moving forward,” he said.
The record-high deficit was expected given that pandemic-related complications had caused soft revenue streams, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said.
“Government officials were actually holding back on spending to avert a substantial hit on the debt-to-GDP ratio which settled at a precarious level of 60.5 percent of GDP,” he said.
“The challenge for the incoming administration would be to find a way to improve our fiscal position in the near term while still ensuring that fiscal authorities provided enough support for the recovery.”
PHL budget gap hits new record in 2021.
Tags: #Budgetdeficit, #BureauofTreasury, #vaccineandotherspending, #finance