Government Urged to Avoid High Surplus, Increase Spending to Support Economy
An economist has advised the government against maintaining a high surplus and instead urged for increased spending to meet the growing demands of the economy. Leonardo Lanzona, a labor economist and professor at the Ateneo De Manila University, expressed concerns that a high surplus could have negative effects on economic growth.
Lanzona emphasized the importance of meeting the needs of a growing economy, especially as the country aims to achieve upper middle-income status. He noted that while the government incurred a budget surplus of P88 billion in January, the highest on record since 1986, it should prioritize investing in various programs to support economic growth.
A budget surplus occurs when the government earns more than it spends during a specific period, with the excess funds typically used for debt repayment or investment in other initiatives. Lanzona pointed out that maintaining a manageable deficit would be more ideal in the current economic climate, especially with the government’s goal of achieving lower inflation and a more stable economy.
Despite the government’s efforts to control spending and increase revenue collection, Lanzona highlighted the potential impact of high interest rates on borrowing and spending behavior. He suggested that a reduction in spending could lead to lower inflation rates but also result in a slower economy.
Finance Secretary Ralph Recto has emphasized his stance against implementing new taxes, focusing instead on improving tax administration. The government aims to reduce the budget deficit further in the coming years, with plans to return the deficit-to-GDP ratio to pre-pandemic levels by the end of the Marcos administration.
