The government’s emerging deficit spending figure in 2020 has reached P1.36 trillion as the country battled the new coronavirus disease 2019 (COVID-19) pandemic for most of last year.
Carlos Dominguez, Department of Finance (DOF) secretary, said at the virtual inaugural meeting and induction of the 2021 Management Association of the Philippines Board of Governors yesterday that the emerging deficit figure is equivalent to 7.5 percent of the projected gross domestic product (GDP) for the year.
“This is slightly below our target in 2020,” Dominguez said, as the government had set the deficit in 2020 to reach P1.38 trillion or 7.6 percent of our GDP, which is more than double the pre-pandemic deficit-to-GDP ratio target of 3.2 percent and the 2019 level of 3.4 percent.
“Despite the large increase, we expect our deficit-to-GDP ratio to remain within the median of (the Philippines’) neighbors and credit-rating peers around the world. We have made sure that the size of our deficit still takes into consideration our adherence to long-term debt sustainability,” he added.
Dominguez said notwithstanding the challenging circumstances, the government managed to collect revenues amounting to P2.8 trillion in 2020.
“This is just four-tenths of one percent short of our total collection outlook for the year.
However, this is lower by nine percent from the 2019 level and by 19 percent from our original target before the crisis struck,” he said.
The government’s total expenditure requirement last year reached P4.205 trillion, which includes the spending mandated under Bayanihan 1 and 2 as well as the continuation of the key infrastructure projects that the government is banking on to support economic recovery.
The total expenditure is 11 percent higher compared to the 2019 level.
Meanwhile, Dominguez said the gross financing raised last year amounted to P2.63 trillion.
This excludes the P540-billion emergency short-term loan from the Bangko Sentral ng Pilipinas, which was already repaid in full in December and re-availed this month.
Of the total borrowings, P1.91 trillion or 73 percent was raised from the domestic market, while the remaining P721.1 billion in financing or 27 percent was sourced from our development partners and the global bond market.
“Because none of the emergency spending for the health crisis was programmed, we needed to bridge the budget gap with additional borrowings. We projected our debt-to-GDP ratio to reach 53.5 percent in 2020 from our pre-pandemic target of 40.2 percent and 2019’s historic low of 39.6 percent. Nevertheless, this level kept us well within the prescribed bounds of fiscal viability,” Dominguez said.
“We have set out a clear strategy for financing our deficit. We prioritized domestic borrowings followed by official development assistance and the international capital markets. We determined this plan as the most prudent approach, ensuring sustainability in our debt service. With our credit ratings at historic highs, we quickly accessed emergency financing from our development partners and the commercial markets at very low rates, tight spreads, and longer repayment periods,” he added.
Dominguez said this year, the Philippines will maintain an elevated but manageable deficit program of 8.9 percent behind the need for strong government fiscal support in restarting the economy.
“Our gross borrowings will reach P3.03 trillion in 2021, roughly equivalent to our funding outturn in 2020. We expect the national government’s debt to settle at 57 percent of GDP this year. Even with the upscaling of our borrowing plan, we will still be able to keep our debt ratio within a sustainable threshold. This gives us the advantage over economies who were already saddled with heavy debt prior to the crisis,” Dominguez said.
“We remain confident that we can easily fulfill our funding requirement for this year,” he added.