An economist said the government continues to enjoy fiscal leeway thus, it can increase spending to address the impact of the pandemic on domestic growth.
This after the Bureau of the Treasury reported that the budget gap as of end-July 2020 totaled to P700.6 billion, 494.03 percent higher than the P117.9 billion in the same period last year.
In a report Wednesday, ING Bank Manila senior economist Nicholas Mapa said this deficit level accounts for about 3.7 percent of gross domestic product, which is below economic managers’ full-year assumption of nine percent for the year.
Last July alone, the budget gap rose by 86.21 percent to P140.2 billion from year-ago’s P75.3 billion. The increase was attributed to the government’s coronavirus disease 2019 response programs.
Mapa said the budget gap is in line with slowing economic activities, which can be traced to the government’s movement restrictions aimed to arrest the rise of coronavirus disease infections.
Revenues last July reached P234.5 billion, 11.22 percent lower than the P264.1 billion a year ago.
Expenditures, in turn, rose by 10.4 percent to P374.7 billion from P339.4 billion in the same period last year.
For the seven-month period, revenues declined by 6.84 percent to PHP1.687 trillion from year-ago’s PHP1.811 trillion.
Spending inched up by 23.78 percent to P2.388 trillion over the P1.929 trillion in end-July 2019.
“Over the course of the next few months, the Philippines will likely grapple with the need to increase expenditures to offset stalling economic growth momentum while revenues stagnate with the economy in recession,” Mapa said.
He said authorities have expressed their preference to hold back on spending, pushing a modest fiscal recovery bill worth roughly P160 billion.
He added since the budget deficit remains below target, “this shows that the government continues to enjoy more than ample fiscal space which should give authorities the green light to accelerate expenditures to salvage some form of growth for the economy”.
“With the rest of the economy mired in recession, the Bayanihan 2 fiscal recovery bill and possible other outlays should help stimulate growth in the coming months although the window for spending to generate enough critical mass to prevent five quarters of contracting GDP is closing fast,” he added.