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‘Philippine recovery imperilled by failure to narrow budget gap’
MANILA, Philippines — The Philippines’ economic recovery may be put in jeopardy as the government continues to fail in narrowing the budget shortfall, a global think tank said.
In its latest economic monitor, UK-based Pantheon Macroeconomics said the Philippines’ strained public finances reflected the feeble recovery it is going through nearly two years since the start of the pandemic.
The country’s budget deficit has reached P1.139 trillion as of end-September amid increasing expenses and lack of tax revenues.
Pantheon senior Asia economist Miguel Chanco said the Philippines will be the only country in emerging Asia with a bloated budget deficit this year.
“The failure to narrow the budget gap this year will pose a big headwind to the economy’s incomplete recovery in 2022,” Chanco said.
“Most of emerging Asia is moving on from the COVID-19-induced budget blowouts last year, easing the pressure on governments to make hard trade-offs going forward,” he said.
Unfortunately, this cannot be said in the case of the Philippines, which continues to experience a sluggish recovery that is crimping revenue growth.
In fact, the country returned to lockdowns three times, which further stalled the already weak economic rebound, Chanco noted.
“The absolute budget deficits in Indonesia, Thailand and India are coming off their pandemic-era heights, unlike in the Philippines,” he said.
If Pantheon’s forecast of a 3.5 percent gross domestic product growth for the third quarter is correct, this means that the annual rolling budget shortfall has risen to 8.7 percent of GDP.
The government is looking at a budget shortfall of P1.85 trillion for 2021, 9.3 percent of the country’s GDP.
“The impact of the country’s lackluster recovery on government revenue is largely to blame,” Chanco said.
The country’s output gap to the pre-pandemic trend remains the largest in the region.
“Some of the weakness in collection is deliberate, following the retrospective cut to corporate tax rates earlier this year,” Chanco said.
“Nevertheless, the country risks being caught in a vicious cycle, at least in the short run, as the lack of funds now looks to be limiting the public infrastructure drive which, in turn, will further dampen the recovery,” he said.
Source: https://www.philstar.com/business/2021/10/27/2136883/philippine-recovery-imperilled-failure-narrow-budget-gap