Budget deficit to widen to 8.1% of GDP — DBCC

MANILA, Philippines — Government economic managers expect the country’s fiscal deficit to widen further than initially expected, with efforts to fight the coronavirus disease 2019 or COVID-19 seen shaving off government revenues while increasing expenditures.

In a statement, the Development Budget Coordination Committee (DBCC) said the government’s budget shortfall for 2020 is projected to reach P1.56 trillion or 8.1 percent of gross domestic product. The latest deficit GDP to ratio is higher than the previous estimate of 5.3 percent announced in March.

The deficit figure was revised upward as the inter-agency body estimated that revenues may fall further than initially expected, while disbursements are projected to increase amid COVID-19 response efforts.

In particular, the DBCC said government revenues are projected to reach P2.61 trillion this year, down by P560.5 billion, or 17.7 percent, than the previous target of P3.17 trillion.

Disbursements, on the other hand, were estimated at P4.18 trillion, up by P12 billion from the previous program.

The DBCC said the expenditure program takes into account the fund releases for COVID-19 initiatives, coming from savings generated through the implementation of austerity measures.

“Despite increased deficit spending, the national government’s deficit-to-GDP ratio will remain in the median of comparable countries in ASEAN and in East Asia, among peers with similar credit ratings, and among other emerging market economies, as long as the ratio does not exceed nine percent,” the DBCC said.

The DBCC said the Philippines’ debt-to-GDP level would also remain manageable, coming from a record-low of 39.6 percent last year.

With a below-nine-percent budget deficit, the Philippines debt level is expected to expand to around 50 percent of GDP, which is still lower than the most recent peak of 71.6 percent in 2004, the committee said.

The DBCC, composed of the Department of Budget and Management (DBM), Department of Finance (DOF), Bangko Sentral ng Pilipinas (BSP) and the National Economic and Development Authority (NEDA) held a meeting on Tuesday to adjust the country’s macroeconomic indicators and fiscal program amid the COVID-19 crisis.

The inter-agency body also adopted a revised 2020 cash budget program at P4.18 trillion or 19.6 percent of GDP, which is nearly the same level as the P4.1 trillion budget this year.