The government’s expenditure effort was at a record high in 2020 amid the need to spend more for programs that would help address the coronavirus disease 2019 (COVID-19) pandemic-induced crisis.
The Department of Finance (DOF) said in its economic bulletin over the weekend the expenditure effort in 2020 jumped to 23.52 percent, 4.06 percentage points higher than the 19.46 percent posted in 2019.
The DOF said this is the highest in the country’s history.
“Expenditures rose by 11.3 percent to P4.23 trillion to support programs to counter the COVID-19 pandemic,” the DOF said.
“This includes the Social Amelioration Program and subsidies to the Philippine Health Insurance Corp. and National Housing Authority,” it added.
The DOF said the historic growth in expenditures led to a higher national deficit that settled at 7.63 percent of gross domestic product (GDP), likewise the highest in the post-war period.
The budget deficit as a share of GDP rose from the 3.38 percent recorded in 2019, with the deficit in 2020 at P1.37 trillion.
Meanwhile, the revenue effort dropped to 15.89 percent in 2020, from 16.08 percent in 2019.
Tax effort likewise fell to 13.93 percent from 14.49 percent the prior year, as collections from revenue-generating agencies suffered due to the economic impact of the pandemic.
The national government’s revenues fell by nine percent to P2.86 trillion in 2020 from P3.14 trillion a year ago, while tax revenues declined to P2.5 trillion, 11.4 percent down from the P2.83 trillion recorded in 2019.
“The fiscal reforms adopted by the Duterte administration, including tax reforms and the utilization of idle savings in the public sector, boosted the revenue effort to its second highest level in history, eclipsed only by the 2019 level attained during the period of an economic boom. These reforms made the country one of the six strongest emerging economies to meet the challenges of the pandemic,” the DOF said.
“The country should continue to adopt fiscal reforms, particularly tax reforms still pending in congress, to sustain these fiscal gains. Due to fiscal reforms, the country was able to fund the unprecedented fiscal requirements imposed by the pandemic and, at the same time, protect its strong macroeconomic fundamentals,” it added.