COVID-19 spending swelled end-May budget deficit to P562.2 billion

MANILA, Philippines — The national government’s budget gap swung to a deficit of P202.1 billion in May as spending for COVID-19 response exceeded still weak tax collection amid the pandemic.

Last month’s budget deficit reversed the P2.6-billion surplus a year ago, when spending on public goods and services was slowed by the delayed approval of the P3.7-trillion 2019 national budget, the latest cash operations report released by the Bureau of the Treasury on Tuesday showed.

But this year, the COVID-19 pandemic ramped up government expenditures—during the month of May alone, disbursements rose 12.4 percent year-on-year to P353.6 billion, of which the bulk or P335.3 billion were spent on items net of interest payments, or so-called “productive spending.”

“The acceleration was propelled by the releases for the second tranche of the small business wage subsidy (SBWS) under the Social Security System (SSS) in line with the implementation of Republic Act No. 11469” or the Bayanihan to Heal as One Act, the Treasury explained.

Under the SBWS program, the government gave away two tranches of P5,000-8,000 in May to cover two months’ worth of salaries of workers at small and medium enterprises (SMEs) which temporarily closed down during the COVID-19 lockdown.

On the other hand, tax and non-tax revenues collected last May fell 52.3 percent year-on-year to P151.5 billion, which Treasury data showed were the lowest monthly take since February 2017’s P151.8 billion.

Extended tax payment deadlines pulled down the Bureau of Internal Revenue’s (BIR) May collection by 44.1 percent to P114.4 billion, while lockdown restrictions on trade also reduced the import duties and other taxes generated by the Bureau of Customs (BOC) by 47.1 percent to P30.8 billion.

Non-tax revenues slid 87.8 percent year-on-year to P6.3 billion in May as the bulk of state-run corporations’ dividends were already remitted in advance as early as April to help finance COVID-19 response, while the lockdown also delayed some privatization activities as well as collection of other fees and charges as government agencies had minimal operations.

From January to May, the cumulative budget deficit ballooned by 69,390 percent to P562.2 billion from only P809 million during the first five months of last year.

End-May expenditures climbed 26.6 percent year-on-year to P1.665 trillion, while revenues declined 16.1 percent to P1.102 trillion.

Amid the COVID-19 crisis, the Cabinet-level Development Budget Coordination Committee (DBCC) had projected the end-2020 budget deficit to reach P1.613 trillion, equivalent to 8.4 percent of gross domestic product (GDP).

Economic managers had said they will only allow COVID-19 stimulus packages that would jack up the budget deficit to as much as 9 percent of GDP, the median of our Asean neighbors and other emerging markets’ deficits.

JPV