The Philippines is unlikely to achieve its goal of reducing public debt to 55.9 percent of the gross domestic product (GDP) by 2028, according to BMI, a unit of Fitch Solutions.
“We believe that this is unlikely to be met. To achieve this, the deficit must be maintained at 3.6 percent of GDP over the subsequent three years (2026 to 2028),” BMI said.
“But this would necessitate spending cuts of almost 1 percentage points, based on our estimates, making it challenging for the current administration to balance its economic agenda. Instead, we forecast the budget shortfall to average 4.6 percent over the same period,” it said.
It said the public debt would recede more slowly, eventually reaching 58.8 percent of GDP by 2028. Igt said the government would also likely fall short in achieving the fiscal deficit-to-GDP ratio of 5.6 percent this year and 5.2 percent in 2025.
“Our forecast points to a widening of the shortfall to 5.9 percent of GDP,” it said.
BMI said the government projection of revenue collection dipping from 16.1 percent of GDP this year to 15.8 percent in 2025 is a “tad too conservative”, especially when the macroeconomic backdrop is set to improve net year.
“We have highlighted in our latest growth piece that a pick-up in domestic demand will raise growth to 6.3 percent in 2025. Strong private consumption and relief from interest rate cuts for corporations will provide a boost to public coffers. If we are right, revenue collection could amount to 16 percent of GDP next year,” BMI said.
“A recent report indicated that revenue amounted to 17.1 percent of GDP in the first half of the year, nearly 1.0 percentage point higher than the government’s full-year target. If revenue growth continues on this trajectory, it could surpass the government’s target as it did in 2023,” it said.
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