THE National Government’s (NG) budget deficit may fall within the ceiling of 5.3% of gross domestic product (GDP) this year, as lower interest rates and improved revenue collection boost fiscal consolidation, officials said.
On Thursday, the Bureau of the Treasury (BTr) reported a budget deficit of P1.506 trillion in 2024, narrowing by 0.38%.
The 2024 reading overshot the P1.48-trillion deficit ceiling set by the Development Budget Coordination Committee (DBCC), the BTr said.
Asked if the NG could narrow the budget deficit to below the P1.54 trillion ceiling and the 5.3% of GDP target in 2025, Finance Secretary Ralph G. Recto said: “Yes.”
“That’s part of our target macro fiscal framework to ensure macro stability, a prerequisite for a credit rating upgrade, and a seal of good housekeeping and macro stability for businesses to flourish,” he said via Viber over the weekend.
The World Bank has projected that the Philippine deficit-to-GDP ratio will narrow to 5.3% in 2025.
Budget Undersecretary and Principal Economist Joselito R. Basilio also expects the deficit not to breach ceiling in 2025, citing lower interest rates and improved price conditions. He made the remarks to BusinessWorld via Viber.
Bangko Sentral ng Pilipinas Governor Eli M. Remolona, Jr. earlier signaled an up to 50 basis-point rate cut this year after unexpectedly holding them steady in February.
Mr. Basilio added that other factors include “fiscal discipline characterized by improved revenue performance following tax administration reforms, gains from past and upcoming new tax measures, and increased spending efficiency.”
The BIR started collecting the 1% withholding tax from online sellers in November and will soon impose value-added tax on digital service platforms.
“It should be noted that the 5.7% deficit-to-GDP ratio is in line with the expectations announced by the DBCC during its December meeting,” he said.
Revenue collection rose 15.56% to P4.42 trillion in 2024, surpassing the P4.27-trillion target due to better-than-expected nontax revenue. The 16.72% revenue-to-GDP ratio was the highest since 1997.
However, tax revenue rose to P3.8 trillion, falling short of the full-year target by 0.51%.
The proposed excise tax on single-use plastics has been approved by the House of Representatives but remains stalled in the Senate. The rationalization of the mining fiscal regime is set to move to bicameral conference committee after the election break.
In an e-mail, Ateneo School of Government Dean and Economics Professor Philip Arnold P. Tuaño said the Philippines needs to at least meet the lower end of the government’s 6-8% growth target and continue its program of tax reforms.
The economy expanded 5.6% in 2024, up from 5.5% a year earlier, but missed the revised 6-6.5% target, the Philippine Statistics Authority said.
“We will have our mid-term elections this year, so although there will be some spending bans during the campaign period, we usually expect higher than usual government expenditures during years with elections,” he said.
The DBCC set the government spending target at P6.18 trillion in 2025.
Officials and analysts cited global uncertainty as the primary risk to the Philippine deficit outlook.
“Risks to fiscal policy include external uncertainty not only due to tensions in Ukraine, Russia and Gaza but also due to trade policy frictions among developed economies such as the US, Canada, China and the European Union,” Mr. Basilio said.
Mr. Tuaño said the government will have to anticipate possible rises in inflationary pressure and the effects of global uncertainty, including changes in export and remittance revenue affecting economic growth.
Asked if the DBCC needs to revise its targets in the upcoming March meeting, Mr. Recto said: “So far we’re on track.”
Meanwhile, Mr. Tuaño proposed that economic managers should consider adjusting their fiscal targets, particularly the deficit-to-GDP ratio, to more “attainable levels” considering the economic conditions.
Debt-to-GDP inched up to 60.7% at the end of 2024 from 60.1% a year earlier, the BTr said in a separate report.
The government is aiming to bring down the debt-to-GDP ratio to 60.4% in 2025 and eventually within the international threshold of 60%. — Aubrey Rose A. Inosante