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Philippines: Government may cut budget deficit to GDP ratio
MANILA, Philippines — The government may cut the budget deficit to as low as 3.2 percent of gross domestic product (GDP) by 2025 if it pursues the consolidation plan proposed by the Department of Finance.
DOF chief economist Gil Beltran said yesterday the next administration can narrow the budget deficit to pre-pandemic levels if it enacts a slew of tax reforms pitched by the agency.
The DOF expects the budget deficit to track a downward trend in the medium term: 7.6 percent of GDP in 2022, 6.1 percent in 2023, 5.1 percent in 2024 and 4.1 percent in 2025.
However, Beltran said the incoming Marcos administration can pull down the budget deficit to as low as 3.2 percent of GDP by 2025, even lower than the pre-pandemic ratio of 3.4 percent in 2019.
To do this, he said the government should consolidate finances by raising additional revenues and minimizing wasteful expenditures.
In May, the DOF warned that the next administration has to collect incremental revenues of up to P249 billion a year to avoid getting new loans just to pay for maturing debts.
As such, it unveiled a three-tranche fiscal program that tries to hit two birds with one stone.
According to the DOF, the consolidation plan can bring in at least P349.3 billion in new revenues every year and also trim the debt-to-GDP ratio to 55.4 percent by 2025.
Without fiscal consolidation, the DOF said the government may be compelled to pile up additional debts on top of its already bloated account.
“Mobilizing an additional P250 billion a year will cut further the deficit so as to reach around 3.2 percent by 2025, a figure comparable to the pre-pandemic deficit of 3.4 percent. It is, therefore, important to restore fiscal health and build up reserves when economic weather is fine, so as to have the capacity to respond again should shocks materialize,” Beltran said.
“This is also akin to having an insurance that covers for contingencies. Not having one is a fool’s game and fiscal heartaches hit the hardest when it’s too late,” he said.
Incoming Finance secretary Benjamin Diokno said the Marcos administration plans to cut the budget deficit to three percent of GDP before the end of its term in 2028.
Source: https://www.philstar.com/business/2022/06/08/2186750/government-may-cut-budget-deficit-gdp-ratio