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Budget gap predictions for PH are reduced by Fitch Solutions

MANILA – Due to the likelihood of continued fiscal consolidation and an increase in tax receipts, Fitch Solutions has revised its predictions for the Philippines’ budget shortfall for this year and the following year downward.

The arm of Fitch Group now expects the government’s budget deficit to account for 7.5 percent of GDP for 2022 and 6.2 percent for 2023 in a report dated June 21 and released on Wednesday.

Its earlier predictions were 6.7% of domestic output in 2023 and 8.1% of GDP for the current year.

After reaching PHP1.67 trillion in 2021, the government’s budget imbalance was 8.6 percent of GDP.

The report stated that while its forecast for 2022 is greater than the 6.1 percent allowed by economic managers “since we expect expenditure to surpass the official target,” it is lower than the government’s 7.6 percent expectation “due to slower economic growth assumption.”

However, it said, “We continue to anticipate that the Philippines is still on track for a gradual fiscal consolidation over the coming years as strong revenue growth, together with a strengthening economy and beneficial tax reforms, would likely offset expansionary fiscal spending.

Revenues are anticipated to reach PHP3.304 trillion this year, up from PHP3.005 trillion last year, and account for 15.2 percent of GDP, according to the National Budget Memorandum released by the Department of Budget and Management (DBM) on June 8.

The predicted increase in revenue for 2023 is PHP3.632 trillion, followed by PHP4.062 trillion in 2024 and PHP4.548 trillion in 2025.

For each of the following years—2022, 2023, 2024, and 2025—the estimated amount of disbursements is PHP4.954 trillion, PHP5.085 trillion, PHP5.392 trillion, and PHP5.723 trillion.

A budget imbalance of PHP1.65 trillion is predicted for this year, PHP1.453 trillion for 2023, PHP1.329 trillion for 2024, and PHP1.174 trillion for 2025 as a result of these factors.

The budget imbalance in 2024 will account for almost 5.1 percent of GDP and 4.1 percent of domestic output, respectively.

According to the research, the government’s budget deficit is expected to continue declining, which is consistent with the goal of the incoming Marcos Jr. administration to reduce the fiscal gap to about 3 percent of GDP by 2028.

“However, we recognize there is still a significant level of uncertainty with regards to the fiscal estimates for 2023,” the statement read. “Marcos may not keep to the existing fiscal projections of the outgoing Duterte administration as he attempts to support his government’s plan.

According to news reports, Amenah Pangandaman, the new budget secretary, was quoted by Fitch Solutions as saying that the economic team would meet in the first week of July following Marcos’ inauguration and would then resubmit the budget proposals with the priority programs of the new administration.

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