DBCC: Budget deficit expected to widen in Q4
At A Glance
- The Development Budget Coordination Committee (DBCC) expects the national government's budget deficit to widen towards the end of the year.<br>The widening deficit is attributed to catch-up spending.<br>The budget deficit to GDP ratio is a measure that compares the budget deficit to the size of the economy.<br>It is an important indicator of the government's financial health and its impact on the overall economy.<br>A high ratio suggests that the government is spending more than it generates in revenue, potentially leading to increased borrowing and economic instability.
The Development Budget Coordination Committee (DBCC) expects that the national government's budget deficit would widen in the latter part of the year, driven by catch-up spending.
In the DBCC mid-year report, the inter-agency body responsible for determining the government's macroeconomic assumptions said the fiscal gap for this year is expected to reach P1.499 trillion, accounting for 6.1 percent of the gross domestic product (GDP).
“NG [national government] deficit is expected to widen towards the end of the year as line agencies catch-up with their spending commitments,” the DBCC said in its report.
As of September 2023, the budget deficit of the Marcos administration reached P983.5 billion, which accounted for 65.6 percent of the government's ceiling.
To reach the target of P1.499 trillion, the government needs to allocate P515.5 billion in the fourth quarter.
“Nonetheless, the deficit will continue to follow a downward trajectory over the medium-term, declining to P1.357 trillion (5.1 percent of GDP) in 2024,” the DBCC said.
The budget deficit to GDP ratio is a crucial measure of the Philippine economy as it reveals the extent to which the government spends more than it generates in revenue, relative to the size of the GDP.
This ratio also indicates the government's financial health, and its ability to manage debt.
“The deficit- to-GDP ratio will further decrease in the succeeding years in line with the MTFF [medium term fiscal framework] target of 3.0 percent by 2028,” the DBCC said.
In addition, with the continued improvement in revenue generation and adoption of fiscal consolidation strategy, the DBCC said that the financing requirements over the medium-term are projected to be lower than the actual financing needs during the height of the pandemic in 2020 and 2021.
“In terms of sourcing, the government will continue its reliance on local currency funding for its financing requirements,” the inter-agency said.
The revised full-year program and borrowing mix was maintained at P2.207 trillion and 75:25 in favor of domestic funding, respectively, with slight adjustments to the distribution based on the performance in the first semester.