New fiscal consolidation goal ‘realistic’–think tank
The fiscal program of the Marcos administration, albeit yet to be threshed out, appears to be “realistic” and favorable to continued economic recovery from pandemic-induced recession, according to GlobalSource Partners.
The New York-based think tank, in a commentary penned by Romeo Bernardo, noted that the goals announced last week by the Development Budget Coordination Committee (DBCC) were “basically an extension” of the previous medium-term fiscal program drawn up by the Duterte economic team.
The new program is seen crucial in that the new administration is making known its commitment to fiscal consolidation.
“The 2028 target for the debt ratio [of] 52.5 percent of gross domestic product (GDP) is certainly more realistic and supportive of postpandemic recovery needs, than a promise of quickly paring it to the prepandemic ratio of 39.6 percent,” GlobalSource said.
The Philippine debt-to-GDP ratio breached 60 percent, the level considered internationally as “prudent,” as it hit 60.5 percent following heavy borrowings during the pandemic. The ratio was at a record-low 39.6 percent in 2019.
The DBCC assumes that the domestic economy will grow by 6.5 to 8 percent from 2023 to 2028 at the end of Marcos’ term.
In the same period, the economic team is aiming for a reduction in the budget deficit of 1-percentage point yearly, from 8.6 percent in 2021 toward the prepandemic level of 3 percent.
GlobalSource observes that the reduction in the deficit and debt ratios to GDP will be done through a combination of raising revenues (15.5 percent of GDP to 17.5 percent) and cutting expenditures (24.1 percent to 20.6 percent).
Considering this, the think tank wants the economic team to map out new economic growth drivers.
“We note that the 6 percent growth target for goods exports is itself unaspiring, especially in light of the new laws liberalizing foreign investments,” it said.
The group awaits details on new revenue sources and expenditure reforms to fund social protection programs, especially health and education; and maintain infrastructure spending at 5 to 6 percent of GDP.
