As the vax implementation proceeds, an increase in government income is anticipated.
An economist has voiced optimism about an increase in state income as a result of the deployment of the vaccine program and the continuing recovery of economic activity despite the epidemic, according to the economist.
It was announced on Tuesday that government income fell by 30.03 percent year on year to PHP245.6 billion, while expenditures increased by 13.24 percent to PHP395.4 billion, as reported by the Bureau of the Treasury (BTr).
Because of this, the budget deficit increased by almost 8,585 percent to PHP149.9 billion, reversing the previous year’s PHP1.8 billion surplus.
Director of economic research at Rizal Commercial Banking Corporation (RCBC), Michael Ricafort, linked the decline to pandemic-related expenditures and the implementation of tighter quarantine measures.
As of the end of June this year, the budget deficit was at PHP716.1 billion, representing a 27.78 percent increase year on year but a decrease from the PHP1.018 trillion projected for the first six months of the year.
Total income reached PHP1.49 trillion, which was greater than the PHP1.421-trillion program target for the six-month period, while total expenditures reached PHP2.206 trillion, which was lower than the PHP2.439-trillion target for the same time.
Among the factors contributing to the increase in the budget gap last June was a decision by the federal government to defer for two months the annual tax filings and payments for 2020, which were supposed to end by April 15 of every year, as a result, the imposition of the two-week enhanced community quarantine (ECQ) that began on March 27 and the modified ECQ that followed for a total of four weeks following that.
The rise in government expenditure, not just for pandemic-related initiatives, but also for infrastructure, according to him, was a contributing factor to the increase in the budget deficit in June of last year.
Ricafort said that infrastructure investment is one of the government’s efforts to assist in the economic recovery as well as to expedite the construction of the projects ahead of the election ban and the national elections in May 2022, which are scheduled to take place in May.
According to the report, increased government spending on Covid-19 vaccines, which could be re-introduced into nature in the coming years, as well as on related preparations/logistics such as testing, quarantine, and health-care facilities, among other things, would result in wider budget deficits and higher government borrowings/debt in the future.
“The vaccination program is expected to significantly reduce new Covid-19 local cases and help justify further reopening the economy, which will aid in improving economic recovery prospects and resulting in 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,” Ricafort stated.
Along with current and future fiscal/tax reform initiatives, this would also help to 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 even further,” he said.