(Bloomberg) -- China’s fiscal revenue shrank at the fastest pace in more than a year, fueling expectations that the government could make another rare mid-year budget revision to aid an economic recovery.

Total revenues, which include the general public budget and the government funds budget, fell 4.1% during January-May from last year to 11.36 trillion yuan ($1.6 trillion). That’s the steepest drop since February 2023, according to Bloomberg calculations based on data from the Ministry of Finance.

The combined spending under the two accounts fell 2.2% on-year to 13.61 trillion yuan in the first five months. That leaves a fiscal shortfall of 2.25 trillion yuan, widening from January-May last year but below the level recorded during the same period in 2022.

The government’s budget has been under strain as slowing economic growth weighed on tax income, while a multiyear property market downturn slashed its income from land sales. Local officials have become more aggressive in chasing companies for taxes dating back decades as they try to plug a hole in their finances caused by the housing crisis.

Authorities have expedited bond sales in recent months to raise funds, as Beijing looks to provide more support to the economy when businesses and households are reluctant to spend. Economists are increasingly calling on Beijing to increase the budget deficit and sell additional sovereign debt to maintain the recovery momentum. 

“The budgeted deficit-to-GDP ratio announced during the NPC was actually lower than expected,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc, referring to the National People’s Congress meeting in March. “It is possible that the number could be raised in the coming months.”

Beijing in October last year took a rare move of adjusting its budget mid-year, raising last year’s fiscal deficit to 3.8% of gross domestic product through the issuance of an additional 1 trillion yuan of sovereign bonds to aid the economy.  

In March, the government set its fiscal deficit target this year at 3% of GDP, which was to be filled in part by 3.34 trillion yuan in sovereign bond issuance. Separately, it also planned to sell 1 trillion yuan in special sovereign debt to fund investment in key projects. 

Yu Yongding, a former adviser to China’s central bank, wrote in an article last week that China may need to sell additional sovereign debt this year to ensure that its full-year growth target of around 5% can be achieved.

Data on Monday also showed persistent weakness in the property market. Local governments earned 227.4 billion yuan from selling land, down from 238.9 billion in April and remaining at the lowest level since May 2016.

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