THE country’s fiscal recovery will not be helped by next year’s P6.352-trillion national budget, a 10.1-percent increase from this year’s outlay that a Fitch Solutions unit said would lead to a wider fiscal deficit to gross domestic product (GDP) ratio.
In a commentary released on Wednesday, BMI Research said the ratio could rise to 5.9 percent this year, contrary to the government’s aim of lowering it to 5.2 percent from a likely 5.6 percent this year.
“The stark disparity between the official projection and ours lies within the numbers: the government based its calculations on [a budget of] P6.072 trillion, whereas we used the headline figure to draw our conclusion,” it said.
It will “essentially” reverse the country’s fiscal consolidation efforts, BMI said, noting that while the budget shortfall had narrowed from the record 8.6 percent in 2021 when public spending was raised to limit the economic impact of Covid-19, “recovery has been gradual and still lagged behind many regional counterparts.”
The target of reducing the public debt-to-GDP ratio to 55.9 percent by 2028 is also at risk, BMI added, as this would require keeping the deficit at 3.6 percent of GDP from 2026 to 2028 — requiring spending cuts of almost 1 percentage point.
The budget shortfall will instead likely average 4.6 percent over the period, it said, which will lead to the debt-to-GDP ratio hitting 58.8 percent by 2028.
BMI said that policy-wise, the budget proposal came with not many surprises given a push to boost infrastructure spending — to support growth — and also defense expenditures due to rising geopolitical tensions.
The government’s 2025 revenue goal of 15.8 percent of GDP, however, was said to be a “tad too conservative” given an expected pickup in economic growth, strong private consumption and rate cuts for corporations.
“If we are right, revenue collection could amount to 16.0 percent of GDP next year,” BMI said.
The 2024 goal of 16.1 percent could also be exceeded, it added, based on latest trends.
“Philippine policymakers tend to underestimate their revenue targets, as seen in the past two years,” BMI noted.
“If revenue exceeds even our projections, we could anticipate a smaller budget deficit.”
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