The Marcos administration’s fiscal program, while yet to be developed, appears to be “realistic” and supportive of continued economic recovery from the pandemic-induced recession, according to GlobalSource Partners.
The New York-based think tank, in a commentary written by Romeo Bernardo, noted that the targets announced last week by the Development Budget Coordinating Committee (DBCC) were “essentially an extension” of the previous medium budget program. term coined by the Duterte economics team.
The new program is seen as crucial as the new administration signals its commitment to fiscal consolidation.
“The 2028 target for the debt ratio [of] 52.5% of gross domestic product (GDP) is certainly more realistic and supportive of post-pandemic recovery needs, than a promise to quickly bring it back to the pre-pandemic ratio of 39.6%,” GlobalSource said.
The Philippines’ debt-to-GDP ratio has risen above 60%, the level internationally considered “prudent”, as it hit 60.5% following heavy borrowing during the pandemic. The ratio was at an all-time high of 39.6% in 2019.
The DBCC assumes the national economy will grow 6.5-8% from 2023 to 2028 when Marcos’ term ends.
Over the same period, the economic team is targeting a reduction in the budget deficit of 1 percentage point per year, from 8.6% in 2021 towards the pre-pandemic level of 3%.
GlobalSource observes that the reduction in deficit and debt-to-GDP ratios will come through a combination of increasing revenues (15.5% of GDP to 17.5%) and reducing spending (24.1% at 20.6%).
Considering this, the think tank wants the economics team to develop new engines of economic growth.
“We note that the 6% growth target for goods exports is itself unambitious, especially in light of new laws liberalizing foreign investment,” he said.
The group awaits details on new revenue streams and spending reforms to fund social protection programs, particularly health and education; and keep infrastructure spending at 5-6% of GDP.
—RONNEL W. DOMINGO
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