The Department of Finance (DOF) said the national government will embark on a path of fiscal consolidation with an initial aim to push the budget deficit back to its pre-pandemic level by 2025.
Finance Secretary Carlos G. Dominguez III said he has given Finance Undersecretary Gil S. Beltran and Assistant Secretary Ma. Teresa S. Habitan the task to draw up a roadmap for the government’s fiscal consolidation.
But with less than a year before the Duterte administration’s term ends, Dominguez said the implementation of their fiscal consolidation strategy will be passed on to their successors.
Aside from Dominguez, whose term is co-terminus with President Duterte, DOF veterans Beltran and Habitan are also set to retire before the end of this year.
“We are preparing a fiscal consolidation plan, but it's not going to come out in one blow,” Dominguez told reporters. “We will do it through periodic issuances, periodic op-eds .”
“It's an evolving plan, which we will leave to our successors in the next administration,” he added.
But based on the initial preliminary estimates presented by Beltran, the national government’s fiscal position may return to its pre-pandemic level by 2025. However, there is a big caveat to attain this outlook.
“If we get all these measures passed,” Beltran pointed out. “There is a big if.”
“It could be even earlier if the next administration will be quick. If they're as quick as this administration, then we can even do it in 2024,” Beltran said.
In 2019, the government’s fiscal deficit stood at only 3.4 percent of gross domestic product (GDP). The DOF expects the ratio to remain above the pre-pandemic level in the medium term, or 2024 at 5.3 percent.
The pandemic-induced fiscal responses also led to a sharp rise in public debt, which Dominguez said will be reduced through a combination of sustained robust economic growth and narrower budget deficit.
Beltran, the DOF’s chief economist, said the government’s debt-to-GDP ratio will settle at around 60 percent in the medium-term, but improvement in productivity growth will be a key factor in bringing it back to a pre-pandemic level of 41 percent.
“We expect the economy to surge upward as soon as the lockdowns are taken out because the factors of production are there, it's just that it cannot move. Once you remove the blockades, the checkpoint, and the restrictions, the economy will boom significantly,” Beltran said.
Dominguez echoed his chief economist assessment, saying “We've emphasized, all the time, you know this pandemic has not destroyed the factors of production, it was just in quarantine. Once that is released, we will grow a very, very healthy pace.”
By 2025, the finance chief said the DOF expects the government’s fiscal and debt levels be back to their 2016 to 2019 trend.