Finance Chief Economist Gil S. Beltran said the government would need an additional P250-billion per year to bring down the government’s financing gap to a figure comparable to the pre-pandemic level of 3.4 percent.
This developed as the Department of Finance (DOF) warned Tuesday, June 7, that the government’s budget deficit is unlikely to return to its pre-pandemic level within the next three-years without any new tax measures and budget cuts.
“Absent new tax measures and further cuts in spending, the latest baseline scenario projects the deficit reaching 4.1 percent of GDP by 2025, down from 2021’s 8.6 percent,” Beltran said in a DOF economic bulletin.
Aside from new taxes, Beltran added that the government also will require cutting non-priority expenditures to narrow the government’s ballooning budget deficit.
But he cautioned against reducing infrastructure spending.
“It is therefore important to restore fiscal health and build up reserves when the economic weather is fine so as to have the capacity to respond again should shocks materialize,” Beltran said.
“This is akin to having an insurance that covers for contingencies. Not having one is a fool’s game and fiscal heartaches hit the hardest when it’s too late,” he added.
On Monday, President-elect Marcos’ pick for the finance post, Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno, said the next administration has no plan to reduce government spending to temper the nation’s ballooning budget deficit.
Likewise, Diokno also expressed hesitation in pushing new tax measures in the first year of the Marcos administration.
Instead, he said the incoming government is banking on better tax administration to shore up state revenues.
Earlier, the outgoing Duterte administration unveiled its Fiscal Consolidation and Resource Mobilization Plan that aims to address the government’s ballooning pandemic-induced debt, which amounted to P3.2 trillion.
The fiscal consolidation plan, however, includes the deferral of income tax reductions scheduled for individual taxpayers and removal of certain value-added tax (VAT) exemptions for senior citizens and persons with disabilities
“At this time, all options are open,” Diokno said. “The new team will evaluate all proposals, then design the appropriate strategy moving forward.”
"I’ve always said the tax structure that the PRRD team will transmit to the PBBM team will be superior to the one the PRRD team inherited from the Aquino II team. It does not mean, however, that it cannot be improved upon,” he added.