Gov’t avoids deficit breach in 2021 amid underspending
MANILA, Philippines — The Duterte administration continued to underspend in 2021 as it tried to temper the growth of its debts, resulting in the government preventing a breach of its budget deficit cap.
Data from the Bureau of Treasury released on Tuesday showed the government disbursed a total of P4.68 trillion in 2021, up 10.6% year-on-year. However, that was 1.30% lower compared to P4.74 trillion that the state was hoping to spend last year.
That the government continued to underspend despite the country’s growing pandemic needs was not surprising at all. Analysts had pointed out that the tempered spending was meant to tame the rise in pandemic-induced debts which, as a share of the economy, ballooned to 60.5% in 2021, the highest since 2005 and breaching the 60% threshold deemed manageable.
As it is, the battered economy had yet to regain its pre-crisis strength to generate enough resources to pay for the country’s expenses. Treasury data showed government revenues grew 5.24% year-on-year to P3 trillion in 2021, exceeding by 4.30% its collections target that was repeatedly watered down amid prolonged lockdowns. It is only this year that economic officials expect revenues to return to pre-pandemic levels at P3.3 trillion.
With the government still spending beyond its means, the government posted a budget deficit of P1.7 trillion in 2021, 21.78% bigger compared to 2020. That fiscal gap was equivalent to 8.61% of gross domestic product, lower than the 9.3% limit set by the economic managers.
In December, the budget shortfall expanded 11.7% year-on-year to P338 billion. In an online commentary, Michael Ricafort, chief economist at Rizal Commercial Banking Corporation, explained that the budget gap typically widens at the last-minute during the final month of a year that precedes an election.
Ricafort added that a ballooning debt pile would make it difficult for the government to fund more stimulus in the event of another virus surge.
“The debt-to-GDP ratio recently hovering at 60% levels… amid wider budget deficits since the pandemic last year, thereby making additional stimulus measures more challenging at the moment unless there would be new sources of new government revenues to fund them," he said.
For this year, the government projects the budget deficit to settle at 7.7% of GDP before further easing to 6.1% in 2023 and 5.1% in 2024. These assumptions, of course, may change when a new administration takes over after the May polls.
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