Gov’t revenues seen to miss targets in ’23 on weak growth

National government revenues are expected to “underperform” this year, given the expected slowdown in the local and global economy, particularly with persistently high inflation, according to Nomura.

Nomura also projected that the country’s gross domestic product (GDP) will grow by only 5.5 percent this year, below the government’s assumption of a growth this year of 6 to 7 percent.

The slowdown from the 7.6-percent growth recorded in 2022 will be “led by lower household spending, as pent-up demand fades and persistently high inflation hurts household purchasing power,” according to the Japan-based financial services group in a commentary.

And while expecting a subdued revenue intake, Nomura thinks that expenditures will not decrease, especially if led by capital outlays under the “Build Better More” infrastructure program.

Still, Nomura thinks that the actual growth rate of the Philippine economy in 2023 might be lower than its forecast as rising prices of food and energy keep inflation high.

On the other hand, higher inflows of foreign direct investments and a faster rollout of infrastructure projects could push the growth readout above 5.5 percent.

Still, Nomura said the Marcos administration’s goals under its medium-term fiscal framework (MTFF) may be hard to achieve.

“Because of the weaker economic environment, we believe the government’s target under its [MTFF] is challenging,” its commentary said.

Based on projections of the inter-agency Development Budget Coordination Committee (DBCC), national government revenues are expected to improve to P6.58 trillion or 17.4 percent of gross domestic product in 2028.

For 2023, the DBCC expects P3.7 trillion or 15.4 percent of GDP.

Also, expenses are expected at 20.4 percent of GDP or P7.72 trillion in 2028. This is projected at P5.52 trillion or 21.5 percent this year.

Further, the DBCC sees expenses beyond revenues to account for 3 percent of GDP in 2028, at P1.14 trillion.

This is intended to have improved from 6.1 percent of GDP this year at P1.47 trillion.

Data at the Bureau of Treasury show that the budget deficit in 2022 was P1.61 trillion, better than the programmed P1.65 trillion.

“Indeed, in 2022, the fiscal deficit outturn reached 7.3 percent of GDP versus our 6.8 percent forecast,” Nomura said in a comment penned by analysts Euben Paracuelles and Rangga Cipta.

“For 2023, we forecast a small narrowing to a still-high 6.6 percent, above the programmed 6.1 percent,” it added.

Ronnel W. Domingo