The Philippine government is anticipated to achieve a reduced budget deficit this year as it remains committed to fiscal consolidation, according to a report from BMI Country Risk and Industry Research, a unit of Fitch Group.
The projected Philippine budget deficit is expected to narrow to 5.5 percent of gross domestic product (GDP) in 2024, down from 6.2 percent recorded last year. This forecast is slightly lower than the government’s revised projection of 5.6 percent, equivalent to P1.484 trillion.
BMI highlighted that this would mark the third consecutive year of shrinking budget shortfalls.
Despite the challenges posed by the COVID-19 pandemic, the Philippine government managed to outpace spending with revenue growth in 2023, resulting in a deficit slightly above the targeted 6.1 percent.
Revenue collection is expected to exceed targets this year, driven by efforts to broaden the tax base and sustained private consumption resilience. The government aims to achieve revenues of P4.27 trillion in 2024, representing 16.1 percent of GDP. BMI forecasts this ratio to slightly decrease to 16 percent by year-end and reach 16.3 percent by 2028.
On the expenditure side, spending is projected to align with targets at 21.5 percent of GDP in 2024, down from 22 percent in 2023. The official disbursement target for the year is P5.75 trillion, equivalent to 21.7 percent of GDP.
Looking ahead to the end of President Ferdinand Marcos Jr.’s term in 2028, BMI anticipates that expenditure as a percentage of GDP will average 20.2 percent.
The government remains committed to infrastructure development, aiming to allocate 5 to 6 percent of GDP for this purpose to support economic growth targets of 6.5 to 8.0 percent.
After achieving growth of 5.6 percent in 2023, falling short of the target range of 6.0 to 7.0 percent, the economy is expected to expand by 6.2 percent in 2024, aligning with the revised goal.
BMI views the narrower deficit as favorable for the country’s fiscal sustainability. Government debt, which reached 61.1 percent of GDP in 2023 due to COVID-19 response efforts, is forecasted to decline to 59.7 percent in 2024 and further to 52 percent by 2028.
President Ferdinand Marcos Jr. has committed to reducing the budget deficit to 3.0 percent of GDP by 2028, down from its peak of 8.6 percent in 2021. BMI notes that while achieving this target may be challenging given the balance between growth and fiscal stability, progress towards fiscal consolidation is evident.
