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Business

Government lowers deficit to GDP ratio

Louise Maureen Simeon - The Philippine Star
Government lowers deficit to GDP ratio
A general view of Metro Manila is seen on November 25, 2022.
AFP / Jam Sta. Rosa

MANILA, Philippines — The country’s economic managers expect to further reduce the share of the budget deficit to national output this year on the back of above-target revenue performance as the economy reopens.

The Cabinet-level Development Budget Coordination Committee (DBCC) said it is looking at the fiscal deficit, when measured against gross domestic product (GDP), to ease to 6.9 percent this year.

This is significantly lower than the 7.6 percent expectation in July and way below the record 8.6 percent last year.

As of the end of the third quarter, the deficit-to-GDP ratio stood at 6.5 percent.

The DBCC’s optimism on lower deficit-to-GDP ratio stems from higher revenue expectation for 2022, which is now pegged at P3.5 trillion from the earlier assumption of P3.3 trillion.

“This is attributed to the improved tax collection and digitalization efforts of the government,” according to Budget Secretary Amenah Pangandaman.

Finance Secretary Benjamin Diokno, for his part, expressed confidence that revenue collections would surpass pre-pandemic levels this year amid higher economic activities and improved tax administration.

Data showed that for the 10-month period this year, total revenue collections reached P2.9 trillion, up 18 percent. This is 83 percent of the revised P3.5-trillion target for the year.

Further, revenue projections in the medium-term are expected to be from P3.7 trillion in 2023 to P6.6 trillion in 2028, as tax reforms from the previous administration and strategies to ensure environmental sustainability are pursued.

In terms of disbursement this year, the DBCC slightly increased this to P5.017 trillion or 23 percent of GDP from the P4.95 trillion in the July meeting.

Pangandaman said this was due to large transfers to local government units, maintenance and other operating expenses as a result of the releases for the targeted cash transfer program, and improved spending on infrastructure and other capital outlays, as well as personnel services.

Meanwhile, disbursements from 2023 to 2028 are also adjusted, but are sustained above 20 percent of GDP, reaching P5.2 trillion in 2023 and expanding to P7.7 trillion in 2028.

From 6.9 percent this year, the administration’s economic team aims to cut the deficit-to-GDP ratio to 6.1 percent in 2023 and further trim it to 5.1 percent by 2024.

Continued downtrend is expected by 2025 at 4.1 percent, going down further to 3.5 percent and 3.2 percent by 2026 and 2027, respectively.

By the end of the Marcos administration, the country’s deficit-to-GDP ratio is targeted to be at the three percent level in 2028.

ECONOMY

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