THE national government’s budget deficit is projected to reach P1.56 trillion or 8.1 percent of the country’s gross domestic product (GDP), amid weaker revenues and higher spending required due to the measures implemented in the government’s coronavirus disease 2019 (COVID-19) response.
This latest projection of the inter-agency Development Budget Coordination Committee (DBCC), as released in a statement yesterday, is 2.8 percentage points higher than the estimate of 5.3 percent of GDP announced last March, with budget deficit then projected at P990.1 billion.
“These revised assumptions will also allow the government to operate with a more realistic and prudent fiscal stance as it flags the downside risks to the economy and the fiscal program for the rest of the year,” the DBCC said.
Expected revenue collection for this year has been revised to P2.61 trillion or 13.6 percent of GDP.
This is lower by P560.5 billion or 17.7 percent compared with the P3.17 trillion program approved by the DBCC on March 27, 2020.
Disbursements for this year, meanwhile, are estimated at P4.18 trillion, which is equivalent to 21.7 percent of GDP.
The DBCC said this slightly exceeds the program approved in March by P12 billion or 0.3 percent of GDP.
“The emerging disbursement program takes into account the releases for COVID-19 initiatives charged to savings coming from austerity measures, among others,” the DBCC said.
The DBCC thus said despite increased deficit spending, the national government’s deficit-to-GDP ratio will remain in the median of comparable countries in Asean and in East Asia, among peers with similar credit ratings, and among other emerging market economies, as long as the ratio does not exceed 9 percent.
Below this threshold, the debt-to-GDP ratio will be around 50 percent, which the DBCC said is far lower than the most recent peak of 71.6 percent in 2004.
The DBCC maintains that the debt level remains manageable, especially as the Philippines enjoyed its lowest-recorded debt-to-GDP ratio of 39.6 percent last year.
Meanwhile, the DBCC adopted a revised 2021 cash budget pegged at P4.18 trillion or 19.6 percent of GDP, which is nearly the same level as the P4.1 trillion cash budget this year.
The revised 2021 cash budget is lower by around P460 billion when compared to the earlier projection of P4.64 trillion in December 2019, following the reduction in revenue estimates for 2021, the DBCC said.
“The DBCC noted that the Philippines has strong economic fundamentals and sound fiscal health. At the same time, the DBCC reiterated its commitment to work with the whole of government in responding to challenges brought about by COVID-19 while helping drive a rapid economic recovery for the country,” the statement read.
