Rizal Commercial Banking Corporation chief economist Michael Ricafort
MANILA – An economist forecasts further improvement in the growth of government revenues in line with the expected easing of movement restrictions by early 2022.
Data released by the Bureau of the Treasury (BTr) on Friday showed a 15.56-percent year-on-year rise of government revenues last November to PHP284 billion.
This jump is higher than the 10.34-percent expansion in expenditures to PHP412.7 billion, which resulted in a budget gap of PHP128.7 billion, down 0.33 percent compared to year-ago level.
“For the coming months, further reopening of the economy towards greater normalcy with the nationwide shift to Alert Level System/smaller scale or granular lockdowns since November 2021 (away from large scale lockdowns at the city/provincial/regional level seen in the past) would help reduce government expenditures as large scale lockdowns had been expensive in the past, while also supporting further growth in government tax collections amid increased business/economic activities, thereby could help narrow the budget deficit,” Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort.
To date, Alert Level 2 is raised over most parts of the country.
Ricafort said further easing to Alert Level 1, if the Omicron coronavirus disease 2019 (Covid-19) variant is better managed and new daily cases remain low, “would fundamentally help lead to narrower budget deficits and, in turn, reduce the need for additional government borrowings/debt.”
If these developments materialize, this is “a step in the right direction to improve the country’s fiscal performance and debt management in a more sustainable manner in view of less lockdowns, going forward,” he added.
BTr data show that total government revenues in the first 11 months this year rose by 5.99 percent to PHP2.77 trillion, while expenditures increased by 11.4 percent to PHP4.106 trillion.
This brought the budget deficit to PHP1.33 trillion, up by 24.63 percent year-on-year.
Ricafort said risks to the improvement of government’s revenue collections include the threat of the Omicron variant given the possibility of the implementation of movement restrictions to address the virus’ spread.
He also cited increased spending for the rehabilitation of areas hit by Typhoon Odette as another factor that “could potentially increase the government’s expenditures, widen the budget deficit that, in turn, could increase the government’s borrowings and overall debt.”
“Continued increase in government spending especially on infrastructure ahead of the election ban from March 25-May 8, 2022 in preparation for the May 9, 2022 elections and also to help pump-prime/stimulate the economy as part of the country’s economic recovery program would also still lead to relatively wider budget deficits,” he added. (PNA)
