THE country’s budget deficit will narrow this year and further improve in 2024, a Fitch Group unit said on Friday.
“The bigger picture is that the Philippines remains well on the path of fiscal consolidation in the medium term,” BMI Country Risk & Industry Research said in a report.
BMI lowered its 2023 deficit estimate to 5.9 percent of gross domestic product (GDP), from 6.4 percent previously, and also forecast a further decrease to 5.1 percent next year.
“Our projections for 2023 are slightly narrower than the government’s projection of 6.1 percent, following an outperformance in revenue growth,” it said.
“Beyond this year, we expect the fiscal deficit to shrink back in line with the P5.77 trillion budget approved by the government on September 28.”
BMI said the government’s 2028 budget deficit target goal was attainable and added that the public debt-to-GDP ratio was likely to fall to 59.0 percent next year.
The House of Representatives has approved a P5.768-trillion national budget for next year, 9.5 percent higher than the 2023 budget.
“While overall disbursements have been raised in peso terms, we expect it to fall as a share of GDP, from 21.3 percent in 2023 to 20.8 percent in 2024,” BMI said.
“This hinges on the economy expanding by 6.6 percent in 2024,” it added.
“As for this year, the Philippine government remains on track to keep spending within its expenditure targets.”
BMI expects disbursement growth to slow to 1.3 percent, noting that government spending was about 63.4 percent of the 2023 budget in August.
It also upgraded the revenue growth projections for the country to 6.5 percent from 5.2 percent for this year.
“We had previously thought that the Philippines’ poor economic performance would weigh heavily on revenue collection,” BMI said.
“But things have not panned out this way and its impact on public coffers was smaller than we expected.”
Revenues totaled P310.6 billion in August, P21.9 billion down from the previous year’s P332.4 billion, while the P443.6 billion in spending was P39.1 billion higher than the year-earlier P404.5 billion.
The eight-month tally of P2.6 trillion marked a 9.03-percent increase in revenues compared to the previous year’s P2.4 trillion.
“Further reforms are underway, further bolstering revenue collection over the coming years,” BMI said.
“We expect revenue growth to accelerate to around 10.0 percent y-o-y (year on year) in the next five years.”
A narrowing of the overall budget deficit, BMI said, means that the public debt burden will ease slightly going forward.
While government debt as a share of GDP peaked in 2022 at 60.9 percent, BMI expects it to fall to 60.5 percent in 2023 before declining to 59.0 percent next year.
“This poses limited risks to the government’s fiscal position over the short term,” BMI said. “The risks to our forecast are skewed to the downside.”
“Real GDP growth in the Philippines could be less robust than we are currently expecting,” it added.
The Fitch Group unit has lowered its full-year growth forecast for the Philippines to 5.3 percent from 5.9 percent to 5.3 percent, saying that this would be in large part to sluggish investment.