The Philippine government ran a whopping P1.37-trillion budget deficit in 2020. A closer look at the figures, however, showed that the government did not meet its targets, particularly on spending for the pandemic.

The Bureau of the Treasury said on Friday, February 26, that the deficit was more than double or 107% more than the P660.2-billion shortfall in 2019, and equivalent to 7.6% of the country’s gross domestic product.

The wider fiscal gap, however, was lower by 24.45% than the revised full-year program of P1.815 trillion.

Government spending on goods and services climbed by 11.3% to P4.23 trillion in 2020, mainly due to programs to address the impact of the coronavirus pandemic.

Note, however, that while spending increased, it was still below what the government intended to spend. 

President Rodrigo Duterte’s economic team programmed P4.335 trillion for 2020. This means that spending was lower by 2.49% or P107.8 billion than the target.

Meanwhile, revenues narrowed to P2.856 trillion, 8.97% lower against the P3.31 trillion raised in 2019, but 13.3% better than the P2.52-trillion revised collection target for 2020.

Before the pandemic, the economic team aimed to collect P3.49 trillion.

Explainer

Dizzy with all the numbers? Here’s a quick explainer.

A budget deficit occurs when spending exceeds the government’s income. The opposite of this is called a surplus, where collections exceed disbursements.

It is normal for governments to run a deficit, particularly in developing countries, as nations aim to grow the economy. It fills up the deficit through borrowing money from domestic and international sources.

Before the start of the year, the government sets how much the deficit would be.

While the deficit exploded in 2020, the government nonetheless did not reach the wider target.

And while spending went up last year, the government was not able to reach the spending target.

2021 targets

For 2021, the government is looking at a wider budget deficit, equivalent to 8.9% of GDP.

The total disbursement program for 2021 is at P4.66 trillion, while the revenue projection is at P2.88 trillion.

The government is expecting another year of lower revenues, as the CREATE bill – a measure that slashes corporate income tax to give companies more cash to spend – is expected to be signed by Duterte. – Rappler.com