The Duterte administration’s economic team has jacked up the government’s budget deficit ceiling for this year and next to address the pandemic and its economic impacts.
The inter-agency Development Budget Coordination Committee (DBCC), a body that sets the macroeconomic targets of the country, hiked the fiscal deficit program for this year to 9.4 percent of gross domestic product (GDP) from 8.9 percent. The DBCC also raised the budget deficit cap in 2022 from 7.3 percent to 7.7 percent.
While the economic managers tweaked the budget deficit assumptions from their earlier spending programs, they maintained the projected revenue levels during the two-year period.
The DBCC estimated that disbursements this year will increase by additional 1.7 percent to P4.74 trillion from P4.66 trillion due to funding requirements to support Bayanihan II, including the procurement of COVID-19 vaccines, among others.
Meanwhile, disbursements are projected to reach P4.95 trillion next year, and will further rise to P5.11 trillion in 2023 and P5.40 trillion the following year.
“The estimated disbursements for 2022 to 2024 already take into account the proposed Growth Equity Fund (GEF), which will be established in line with the implementation of the Supreme Court Ruling on the Mandanas-Garcia case,” DBCC said.
“The GEF aims to assist poorer Local Government Units (LGUs) in addressing the problems of marginalization, unequal development, and high poverty incidence,” it added.
Revenues, on the other hand, are maintained at the DBCC approved levels in December last year at P2.88 trillion for 2021 and at P3.29 trillion for next year.
“As economic activities are expected to pick up over the medium-term, revenue collections are pegged at P3.59 trillion and P4.0 trillion for 2023 and 2024, respectively,” DBCC said.
Despite higher budget gap assumptions, the DBCC assured that the government will continue to adopt a fiscal consolidation strategy to gradually bring the deficit back to pre-COVID-19 levels.
In 2023, the inter-agency committee projected the government’s budget deficit to drop to 6.4 percent of GDP and 5.4 percent of the economy in 2024.
“The effects of the COVID-19 pandemic may remain in the short-term, but we are optimistic that the economy will return to its upward growth trajectory starting this year,” DBCC said.
On Tuesday, the DBCC slightly revised its GDP projection for 2021 to around 6.0 percent to 7.0 percent from an earlier range of 6.5 percent to 7.5 percent.
The economic managers estimated that GDP will return to a pre-pandemic level next year, growing at 7.0 percent to 9.0 percent. The range, however, is slower compared with the previous 8.0 percent to 10.0 percent projection.
Between 2023 and 2024, the DBCC was forecasting that the local economy will grow by 6.0 percent to 7.0 percent.