The government is set to start serious efforts to bridge the country’s budget deficit next year to bring the gap back to prepandemic levels given rosier economic prospects seen to boost state revenues.
“We are pretty sure that by 2022, we will begin to return to the normal fiscal deficit of about 3.5 to 4 percent” of gross domestic product (GDP), Finance Secretary Carlos Dominguez III told CNBC on Tuesday.
As the government ramped up spending especially for COVID-19 response while revenue remained weak due to a prolonged pandemic-induced recession, Dominguez said the country would post a bigger budget deficit this year. He said the country, however, remained in the middle of the pack of economies with similar investment-grade credit ratings as the Philippines.
The Development Budget Coordination Committee had programmed a deficit of 8.9 percent of GDP this year, equivalent to a record P1.78 trillion with P2.88 trillion in revenue exceeded by P4.66 trillion in expenditure expected by year-end.
Since the government wanted to sustain robust spending, especially on infrastructure, in the near term, the revert to a smaller budget deficit would mainly come from the revenue side.
Dominguez said fiscal consolidation would be “from a combination of a reduction in the disruptions due to the [COVID-19] contagion, increase in public and private investments, drop in unemployment, increase in consumption, increase in taxable profit, [and] return to solid investments-led growth of the economy.”
Dominguez is bullish the country and the economy will return to normalcy by the beginning of next year after about 70 million Filipinos comprising the entire adult population would have already been vaccinated against COVID-19.
In its latest cash operations report released on Tuesday, the Bureau of the Treasury said the government’s first-quarter budget deficit ballooned by 273.1 percent to P321.5 billion from P86.2 billion a year ago.
End-March spending on public goods and services jumped 19.9 percent to P1.02 trillion from P849.2 billion last year, while tax and nontax revenues in the first three months fell 8.7 percent to P696.5 billion from P763.1 billion a year ago.
Productive expenditures net of interest payments climbed by a faster 22.3 percent year-on-year to P892.1 billion from January to March.
In March alone, disbursements rose 22.3 percent year-on-year to P407.6 billion, “buoyed mainly by the disbursements for the infrastructure projects of the DPWH (Department of Public Works and Highways), as well as for the various social welfare programs of the DSWD (Department of Social Welfare and Development), the Dole (Department of Labor and Employment), and the Owwa (Overseas Workers Welfare Administration),” the Treasury said in a statement.
“The continuing implementation of the Bayanihan 2 for initiatives such as the rice resiliency program of the DA (Department of Agriculture) and health programs of the DOH (Department of Health) also contributed significantly to the strong spending performance in March,” it added.
On the other hand, end-March revenues were primarily pulled down by the 50.6-percent year-on-year drop in non-tax collections to P70.4 billion. To recall, state-run corporations last year remitted their dividends to the Treasury under the Bayanihan to Heal as One Act or Bayanihan 1 Law at the onset of the pandemic to help finance COVID-19 response, hence a high base for non-tax revenues.
Tax collection inched up by 0.9 percent year-on-year in the first quarter to P626 billion.
The Bureau of Internal Revenue’s (BIR) first-quarter tax take was up by 0.2 percent year-on-year to P469.7 billion following a 1.3-percent hike in March to P133.4 billion.
Import duties and other taxes collected by the Bureau of Customs (BOC) during the three-month period increased 2.7 percent year-on-year to P149.2 billion thanks to the 22.6-percent growth to P54.7 billion posted last month.