As the vax implementation proceeds, the government expects to see an increase in income
Following the launch of the vaccine campaign and the continuing recovery of economic activity during the epidemic, an economist voiced optimism for an increase in state income.
The Bureau of the Treasury (BTr) announced on Tuesday that government revenues fell 30.03 percent year on year to PHP245.6 billion, while expenditures increased 13.24 percent to PHP395.4 billion.
The budget deficit increased by almost 8,585 percent to PHP149.9 billion, reversing the previous year’s PHP1.8-billion surplus.
Chief economist Michael Ricafort of Rizal Commercial Banking Corp. (RCBC) ascribed this to pandemic-related expenditure and the implementation of tighter quarantine measures.
The budget deficit as of end-June this year was PHP716.1 billion, up 27.78 percent year on year but lower than the PHP1.018 trillion budgeted for the first half of the year.
For the six-month period, total receipts were PHP1.49 trillion, up from the PHP1.421-trillion program, while expenditures were PHP2.206 trillion, down from the PHP2.439-trillion program.
Because of the imposition of the two-week enhanced community quarantine (ECQ) that began last March 27 and the modified ECQ in the following four weeks, Ricafort attributed the increase in the budget gap last June partly to the government’s decision to defer for two months the annual tax filings and payments for 2020, which were supposed to end by April 15 of every year.
According to him, the rise in government expenditure, not only for pandemic-related initiatives but also for infrastructure, led to the increase in the budget deficit in June.
Infrastructure investment, according to Ricafort, is one of the government’s efforts to assist in economic recovery and to expedite project completion ahead of the election ban before the national elections in May 2022.
“Increased government spending for Covid-19 vaccines, which could be recurring in nature in the coming years, as well as related preparations/logistics, such as for testing, quarantine/health care facilities, and other(s),” he added, “would also lead to wider budget deficits and higher government borrowings/debt in the future.”
According to Ricafort, the vaccination program will “significantly reduce new Covid-19 local cases and help justify the further reopening of the economy, which will help improve economic recovery prospects, as well as higher government tax revenue collections and less need for government spending on various Covid-19 programs, which will fundamentally help narrow the budget deficit going forward.”
“Along with current and future fiscal/tax reform initiatives, this would also help make the country’s budget deficit, debt stock, and overall fiscal performance more manageable and sustainable in the coming years, particularly if the economy picks up/recovers further,” he said.