Debt-watcher Fitch Ratings expects the ratio between the country’s economic output and the government’s budget deficit would remain above its pre-pandemic levels next year.

Fitch Ratings said the government’s fiscal deficit-to-gross domestic product (GDP) ratio, a closely watched indicator of a country’s credit worthiness, is projected to fall to 7.7 percent this year and 6.0 percent in 2023.

While there is a downward trend as economic activity recovers, Fitch noted that the deficit-to-GDP ratio is still above a pre-pandemic level of only 3.4 percent.

However, the higher deficit-to-GDP ratio is still within the government’s forecasts of 7.7 percent and 6.1 percent for this year and next, respectively.

Fitch estimated that the deficit had hit 8.4 percent of GDP last year, slightly above the government’s 8.2 percent ceiling.

According to Fitch, its 2021 deficit-to-GDP outlook was based on a 6.0 percent rise in revenue and about a 10.0 percent growth in expenditure.

Last August, Finance Chief Economist Gil S. Beltran said the government will need to pass more fiscal reforms to address its widening budget shortfall in the wake of the prolonged coronavirus pandemic.

Beltran noted that the budget deficit as a percentage of GDP has risen to more than double compared with a pre-pandemic level of 3.4 percent and further swelled from 6.53 percent in 2020.

“The country should continue to adopt fiscal reforms, particularly tax reforms still pending in Congress, to sustain these fiscal gains,” Beltran said.

Earlier, Finance Secretary Carlos G. Dominguez III 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.

But with only months before the Duterte administration’s term ends, Dominguez said the implementation of their fiscal consolidation strategy will be passed on to their successors.

Based on the initial preliminary estimates of the DOF, the national government’s fiscal position may return to its pre-pandemic level by 2025. However, there is a big caveat to attain this goal.

“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 GDP. The DOF expects the ratio to remain above the pre-pandemic level in the medium term, or 2024 at 5.3 percent.