PH budget deficit seen further narrowing in 2023, 2024

MANILA  -The Philippine government’s budget deficit is set to continue narrowing in 2023 and 2024 amid improving revenue turnouts, according to BMI Country Risk and Industry Research.

The Fitch group subsidiary forecasts the deficit to settle at 5.9 percent of gross domestic product this year and further to 5.1 percent in 2024.

The metric has receded from 8.6 percent of GDP in 2021 to 7.3 percent in 2022.

“Our projections for 2023 are slightly narrower than the government’s projection of 6.1 percent, following an outperformance in revenue growth,” BMI.

The research firm also expects the fiscal deficit to shrink further after this year as theP5.77-trillion proposed national budget for 2024 makes progress through the legislative process.

READ: PH budget deficit shrank by 45% in July

“The bigger picture is that the Philippines remains well on the path of fiscal consolidation in the medium term, and is now on pace to meet the [Marcos administration’s] target of 3 percent by 2028,” BMI said.

“Accordingly, we expect the public debt-to-GDP ratio to fall to 59 percent in 2024,” it added.

Last August, Budget Secretary Amenah Pangandaman said the debt-to-GDP ratio may not sink below the threshold in the next three years as the country has not yet fully emerged from the restrictive impact of the pandemic on production and consumption activities.

With the need to respond to pandemics, the government was prompted to borrow heavily, bringing the debt ratio to 54.6 percent of GDP in 2020 and further to 60.4 percent in 2021.

Debt-to-GDP ratio

Pangandaman also said the debt level will not be going down until 2025 considering that the Marcos administration’s planned revenue measures have not yet kicked in.

READ: New loans push government debt stock to new peak in July

Still, she said that the Marcos administration’s medium-term fiscal framework sets a goal of reducing the debt stock to 51 percent of GDP by 2028.

Meanwhile, BMI said the Philippine government remained on track to keep spending within its expenditure targets this year.

An unplanned contraction in government spending was largely blamed for the slowdown in GDP growth in the second quarter, which was pegged at 4.3 percent — from 7.5 percent in the same period of last year and 6.4 percent in the first quarter this year.

“We had previously thought that the Philippines’ poor economic performance would weigh heavily on revenue collection, but things have not panned out this way and its impact on public coffers was smaller than we expected,” BMI said.

Citing monthly revenue data, BMI noted that collection as of August has already amounted to about P2.58 trillion, equivalent to about 70 percent of the full-year revenue target.

“A narrowing of the overall budget deficit means that the public debt burden should ease slightly going forward. While government debt as a share of GDP peaked in 2022 at 60.9 percent, we expect it to fall to 60.5 percent in 2023, before declining to59 percent in 2024,” BMI said. INQ