The budget deficit’s share of the overall economy in the Philippines softened in the first quarter and is gradually approaching its pre-pandemic level as the government works towards consolidating its finances. According to reports, the country’s budget deficit, when measured against the gross domestic product (GDP), decreased to 4.5 percent in the first quarter from 5.8 percent in the same period last year. The deficit was recorded at P272.6 billion as of end-March.
This improvement is attributed to improved revenue collections, which grew by 14 percent to P933.7 billion during the quarter. Both tax and non-tax revenues saw growth, leading to a more disciplined government spending approach. However, despite the easing deficit-to-GDP ratio, the government anticipates that reducing the deficit will take longer than initially projected due to the continued need to support key programs with limited fiscal space.
The government is now expecting that achieving pre-COVID deficit levels may stretch until 2028. The Development Budget Coordination Committee (DBCC) has raised the budget deficit ceilings for the coming years, with projections indicating a slower reduction in the deficit. By 2028, the budget deficit is forecasted to be at P1.37 trillion or 3.7 percent of the economy, instead of reaching the pre-pandemic level of three percent.
To address the deficit, the DBCC plans to utilize borrowings alongside increased revenue collections from improved tax administration and recalibrated revenue measures over the medium term. With these measures in place, the government aims to gradually bring the budget deficit back to sustainable levels in the years to come.
