Cautious approach on stimulus measure to address budget gap rise

The government reported an annual jump in the February 2021 budget gap to PHP116 billion but an economist said prudent implementation of pandemic-related spending would address the expected rise in the budget deficit.

Data released by the Bureau of the Treasury (BTr) showed a 208.47 percent increase in the budget deficit from year-ago’s PHP37.6 billion.

This, after expenditures, posted a larger expansion of 37.27 percent to PHP335.5 billion compared to the 6.15 percent increase of revenues to PHP219.6 billion.

In the first two months this year, the budget deficit surged by 793.68 percent to PHP130 billion against year-ago’s PHP14.6 billion.

Spending rose by 18.27 percent to PHP610.3 billion while revenues contracted by 4.22 percent to PHP480.3 billion.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a report, said the weeklong enhanced community quarantine (ECQ) in the NCR Plus bubble, which includes the National Capital Region (NCR) and four nearby provinces of Bulacan, Rizal, Laguna, and Cavite, from March 29-April 4 poses threats in the government’s fiscal position and impact on domestic growth.

He said a week of ECQ in the said area would need at least PHP20 billion in financial subsidy to low-income households.

He also said the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which was recently signed into law as among the stimulus measures of the government, will add to the burden of lower revenues since it slashes corporate income tax (CIT)

“However, any resulting increase in economic/business activities (i.e. higher multiplier effects on the economy) that would eventually entail more tax revenue collections by the government and structurally higher tax base for the economy, would be an important positive offsetting factor,” he said.

He said gains in government programs to reduce coronavirus disease (Covid-19) infections will also boost the possibility of re-opening of the domestic economy and help in revenue generation.

“For the coming months, continued cautious approach on any additional stimulus measures, just like in 2020, would help temper/limit any further widening of the budget deficit and any further rise in the debt-to-GDP ratio (from the current 58 percent; after 54.5 percent in end-2020 and the low of 39.6 percent in end-2019),” he added.

Source: Philippines News Agency

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