Philippine fiscal consolidation may move at slower pace—DBM

The Marcos administration’s efforts toward fiscal consolidation may proceed at a slower pace, as economic managers are considering revising down their growth forecasts for the medium term, the Department of Budget and Management (DBM) said.

Budget Secretary Amenah F. Pangandaman said the Development Budget Coordination Committee (DBCC) wants to maintain the three-percent budget deficit-to-gross domestic product (GDP) ratio target by the end of President Marcos’ term in 2028.

However, the ratio’s deceleration may not align with the economic team’s initial projections.

“Still, the three percent by the end of the administration is same,” Pangandaman told Manila Bulletin on Monday, Feb. 19. “However, the decline from 2024 to 2027 is not as steep.”

Under the medium-term fiscal framework (MTFF), the government is targeting a reduction in the deficit-to-GDP ratio to 5.1 percent this year, followed by a continued decline to 4.1 percent by 2025, 3.5 percent by 2026, 3.2 percent by 2027, and ultimately reaching 3.0 percent by 2028.

Pangandaman said that the DBCC, an inter-agency body responsible for setting the government’s macroeconomic assumptions, would adjust its fiscal forecasts to align with the expected slowdown in GDP growth targets.

Earlier, Finance Secretary Ralph G. Recto said the DBCC is in the process of formulating “more realistic” growth targets for the years 2024 through the end of President Marcos’ term.

Recto said the adjustment aims to better align with current economic conditions, especially after the previous year’s growth fell below the government’s expectations.

“We are reviewing all of that. It’s a six-year term for the President and we’ve finished one year and a half. We know what’s happening globally, so we have an idea of something more realistic,” the finance chief had said.

Should the GDP targets be recalibrated, Pangadaman, chairperson of the DBCC, said “all [macroeconomic assumptions] will need adjustments.”

“All of these are subject to study, the technical staff are working on the numbers now,” she said.

The Department of Finance is currently pushing for the approval of its “refined” priority tax measures, aiming to boost the revenue share to nearly 17 percent of GDP by 2028.

These priority measures cover the value-added tax on digital service providers, the Imposition of excise tax on single-use plastics, Package 4 of the comprehensive tax reform program, rationalization of the mining fiscal regime, and the reform on the motor vehicle users’ charge.

“Considering these reforms altogether, we expect total revenues to grow from 15.5 percent of GDP in 2024 to 16.8 percent of GDP in 2028,” Recto said.

Recto said the DOF wants to pass all priority reforms within this year.

Finance Assistant Secretary Karlo Fermin S. Adriano said the revised proposal aims to front-load the implementation of the revenue-increasing provisions in 2024 and back-load some of the revenue-eroding provisions in 2028 when the country is in a much better fiscal position. — Chino S. Leyco