(ATF) – With millions of Chinese workers locked down for two months during the coronavirus crisis, the government saw tax receipts plummet.
And with officials predicting more fiscal pain ahead, it looks likely that the world’s second-largest economy may be forced to live on borrowings for an extended period.
Fiscal revenue declined 14.3% year-on-year to 4.6 trillion yuan ($650.4 billion) in the first quarter, official data by the Ministry of Finance (MOF) showed Monday.
While government spending also fell, by 5.7% to 5.53trn yuan, health expenditure in the period rose 4.8 % to 497.6bn yuan as the nation fought the Covid-19 outbreak.
The MOF attributed the decline in fiscal revenue to the virus outbreak, which began late last year in the central industrial city of Wuhan. It also said other factors, such as the country’s massive tax and fee cuts, were to blame.
Ministry official Liu Jinyun, was cited by news agencies as forecasting the decline in tax receipts would continue, even as China trumpets the apparent return of its industrial base to almost normal operations
“Affected by the development of epidemic at home and abroad, fiscal revenues are still declining in the second quarter, but the pace of fiscal revenue decline will gradually moderate,” Reuters quoted Liu as telling briefing.
China’s epidemic has ravaged its economy, with Q1 GDP registering the first decrease in generations. It had lowered the growth rate of national fiscal revenue by about 10 percentage points, the MOF said.
In response, the central and local governments have issued more than trillion yuan in a variety of bonds to stimulate the development of everything from infrastructure projects to technology sandboxes in a bid to revive industry.
At the briefing, Liu said financial departments at all levels have allocated 145.2bn yuan to epidemic prevention and control. Another 156bn has been earmarked for helping the disadvantaged.
Liu said that while the second quarter would see another decline, the losses would narrow.
Fiscal revenue growth had begun slowing even before the coronavirus outbreak. Although it climbed more than 3% to 19trn yuan last year, the increase was less than that in 2018 as the country launched massive tax and fee cuts to support economic growth amid concern the economy was slowing.