The Philippines might face increased indebtedness if it falls short of the economic growth target of 6 to 7 percent this year, putting fiscal stability at risk in the medium term, according to New York-based GlobalSource Partners.
This, even as Philippine gross domestic product (GDP) grew by 6 percent in the first semester of 2024.
“Some think tanks and international development partners have raised doubts about the feasibility of the growth targets. If this happens, we can see more borrowings incurred and the medium-term fiscal sustainability at risk,” GlobalSource said in a statement on Friday.
Gross borrowings of the Marcos administration went up in August as the government sourced more from the domestic market.
Based on government data, the combined gross domestic and external borrowings of the government amounted to P174 billion in August, jumping by 40.3 percent from last year’s P124.05 billion.
Likewise, the state’s eight-month gross financing also leaped by 17.4 percent to P1.93 trillion.
Given the country’s current fiscal position, GlobalSource noted that the government’s higher fiscal deficit—resulting from revenue collections of P2.99 trillion as of August, which are outpaced by expenditures of P3.69 trillion—will likely lead to increased borrowing and a higher overall debt burden.
“The imperative to raise more funds by borrowing could have also been motivated by the need to finance infrastructure projects and social services, as well as probably various forms of pork barrel projects by some legislators,” the think tank said.
Limited results
It noted that “legislative insertions,” which involve adding a long list of projects—whether prioritized or not—to the budget under “unprogrammed appropriations” have contributed to the government’s declining fiscal situation.
“Instead of raising a more progressive tax policy on wealth, for instance, [the national government] opted to depend on better tax collection, which has yielded limited results in the past,” it added.
As of end-August, the government’s debt stock stood at P15.55 trillion, about three times larger than the full-year budget.
GlobalSource said there is an urgent need to fund the 2025 government budget of P6.352 trillion, which will come from the “unused” funds of state-owned corporations, including the Philippine Health Insurance Corp.
Earlier, Finance Secretary Ralph Recto said that there will be no new taxes during the remaining years of the Marcos administration, which would instead focus on improving tax collection efficiency.
Recto said this can be achieved by boosting nontax revenue collections this year, raising the dividend remittance rate from state-owned corporations to 75 percent of their earnings from 50 percent, and privatizing government assets.