‘Budget deficit may hit P1.7 trillion this year’

MANILA, Philippines — The country’s budget shortfall may return to expansion mode this year, rising to about P1.7 trillion as government revenues will likely take a beating from the expected economic slowdown, according to an analyst.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion said the bank’s updated fiscal deficit forecast stood at P1.7 trillion, 13 percent higher than its earlier projection of P1.5 trillion.

This is about six percent higher than the 2022 budget deficit recorded at P1.61 trillion.

The bank’s assumption is also significantly higher by 16 percent from the P1.47 trillion outlook of the government economic team based on the medium-term fiscal framework.

“Aside from the high base effect in 2022, disinflation and slower cyclical spending conditions would risk dampening overall collections,” Asuncion said in a report.

“Less upbeat revenues will restrain primary expenditure growth to four percent in our estimate,” he said.

Last year, data showed that total revenue collection improved by 18 percent to P3.55 trillion.

For 2023, the economic team is looking at a significant slowdown in revenue growth at only 5.4 percent to P3.71 trillion.

On the other hand, government spending in 2022 went up by 10.35 percent to P5.16 trillion.

This year, disbursements are seen easing by 3.2 percent to hit P5.18 trillion.

In February, the government reverted back to a budget deficit after a quick surplus at the start of the new year as revenues declined.

“There has been a reliance on borrowing. Except that this time around, tax revenues took a hit with an annual decline, while expenditures were flattish,” Asuncion said.

The bulk or 91 percent of the total revenues came from tax collections at P192.3 billion, which went down three percent.

“Because of the tax revenue decline of three percent year-on-year and an estimated seasonally adjusted month-on-month 15 percent decline, our updated fiscal deficit forecasts reverted to a hefty 2023 budget deficit of P1.7 trillion,” Asuncion said.

He added this could further balloon to another massive P2.3 trillion by 2024.

“That said, the fiscal gap forecasts translate to sustained borrowing pressures that pose the risk of enlarging the government debt stock,” he said.

Next year, however, Asuncion is expecting that tax revenues would grow by as much as six percent as economic growth regains momentum and inflation returns to the target band of the government.

“Average two-digit primary expenditure gain is projected in 2024 although the government may decide to keep spending in line with revenue growth,” he said.