Gov’t Q1 tax take exceeds goal but spending falls short of program

The government has underspent by 13.9 percent in the first quarter despite continuing efforts to lift the economy out of the pandemic-induced recession.

Data from the Department of Finance (DOF) showed that government spending on public goods and services in the first three months of the year reached P1.02 trillion, falling short of the P1.18 trillion programmed for the period.

Actual disbursements, however, grew by 19.9 percent from P849.2 billion in the first three months of last year.

In its earlier assessment report on the national government’s first-quarter disbursement performance, the Department of Budget and Management (DBM) attributed the year-on-year increase to “COVID-19 recovery measures and various infrastructure projects nationwide.”

The DBM and the DOF reports, however, did not explain the below-program spending.

Underspending has been a problem that the Duterte administration wanted to address as the agencies’ absorptive capacity, particularly given bigger budgets, remained a challenge.

Unspent funds

When legislators sought larger stimulus packages to address the health and socioeconomic crises inflicted by the COVID-19 pandemic, government economic managers had pointed to billions of pesos yet to be spent in last year’s national budget as well as the funds earmarked under Bayanihan 1 and 2 laws.

President Duterte had extended the validity of 2020 budget funds up to end-2021, while Bayanihan 2’s effectivity had been prolonged up to the middle of this year.

But DBM data had shown that out of the P653.4 billion released from March 2020 to mid-April 2021 for pandemic response, one-third or P217.3 billion remained unspent as of last month.

Legislators are currently moving to further extend the validity of Bayanihan 2 funds up to year-end.

The Philippine Statistics Authority (PSA) data showed that government final consumption expenditure in the first quarter grew 16.1 percent year-on-year and contributed 2 percentage points to gross domestic product (GDP)—the biggest growth and largest contributor among GDP’s expenditures-side items even as the total output shrank by 4.2 percent year-on-year, which prolonged the recession to five straight quarters.

Bigger deficit

In the meantime, the gradual easing of quarantine restrictions leading to the resumption of more economic activities allowed the government to beat its first-quarter revenue target—the actual tax-take of P696.5 billion exceeded the P640.3-billion goal.

But end-March tax and nontax revenues were still 8.7 percent lower than the P763.1 billion a year ago, or before the pandemic wreaked havoc on the economy.

The projected higher government spending for COVID-19 response, which included vaccine purchases, will widen the 2021 budget deficit to P1.86 trillion, equivalent to 9.4 percent of GDP.

The Cabinet-level Development Budget Coordination Committee (DBCC) previously programmed this year’s fiscal deficit at P1.78 trillion or 8.9 percent of GDP—in the middle of the pack among the Philippines’ Asean neighbors and similarly rated investment-grade economies.

But this month, the DBCC hiked the expenditures program for 2021 to P4.74 trillion from P4.66 trillion, while keeping the targeted revenue at P2.88 trillion—still below the prepandemic collections of a record P3.14 trillion in 2019. INQ