Government to stick to fiscal plan

MANILA, Philippines — The government is sticking to its plan to narrow the budget deficit to 7.7 percent of the economy this year, insisting that the fiscal program can withstand the financial needs to address the spread of new virus variants.

Economists who earlier spoke with The STAR warned that worrying about the deficit too much may result in reduced funding for social services that the poor require to survive another year in the pandemic.

Finance Undersecretary and chief economist Gil Beltran said the government sees no basis yet to adjust the fiscal blueprint for 2022 in spite of the recent spike in COVID-19 cases that pushed Metro Manila and nearby provinces to Alert Level 3.

Beltran said the Cabinet-level Development Budget Coordination Committee (DBCC) crafted the fiscal program on the assumption that infection spikes would recur. The DBCC plan, he added, assumed that the pandemic may drag on even beyond this year.

“We don’t foresee any significant deviation from our fiscal program. We assumed [that there will] temporary surges through the year,” Beltran told The STAR.

“We also assumed that we will increasingly learn to live with the virus,” he said.

Based on its latest adjustments, the DBCC expects the 2021 deficit to widen to P1.61 trillion or 8.2 percent of the economy from P1.37 trillion or 7.6 percent in 2020.

The economic team plans to slash this deficit to 7.7 percent this year, then to 6.1 percent in 2023, and 5.1 percent in 2024.

To do this, the government targets revenues to increase from P3.03 trillion last year to P3.3 trillion in 2022 and P3.62 trillion in 2023. Expecting that the economy by then has adjusted to pandemic protocols, state revenues should reach a record P4.05 trillion in 2024.

On the other hand, the government plans to minimize disbursements as a share of the economy in the next three years. From a forecast of 23.8 percent in 2021, spending will sink to 23 percent this year, 21.6 percent in 2023, and 21 percent in 2024.

Ateneo de Manila University economics professor Leonardo Lanzona, however, warned that the plan to slash the deficit should be enforced with flexibility on uncertainties posed by the spread of new variants.

“Budget deficits are expected to be higher one way or another,” Lanzona said in a text message.

“What is crucial is that the government spends its resources on ensuring that people are able to meet their basic needs and ensure that poverty increases are limited,” he said.

Lanzona explained that the shift to Alert Level 3, now looming to become Alert Level 4, impacts the activities of small-scale enterprises in the services sector. He said their workers may need to take on duty shifts and, in the process, pay cuts now that operational capacities are reduced.

Likewise, he said the tightening of quarantine rules pushed the reopening of face-to-face schooling to a later date. As a result, children who study with limited connectivity would be disadvantaged for an extended period.