Deficit-to-GDP ratio seen at 5.9 percent this year

MANILA, Philippines — Japanese investment bank Nomura expects the Philippines’ deficit-to-gross domestic product (GDP) ratio to remain “high” at 5.9 percent this year.

Although narrower than last year’s 6.2 percent, the forecast is still above the government’s target under the medium-term fiscal framework (MTFF), which was earlier revised in March to 5.6 percent from 5.1 percent previously.

“The MTFF targets will be challenging to meet due to spending priorities, particularly infrastructure projects under the ‘build better more’ program,” Nomura said in a report.

Latest data released by the Bureau of the Treasury (BTr) showed that the government posted a budget surplus of P42.7 billion in April, 36 percent lower than last year’s P66.8 billion.

This is the second time this year that the government posted a surplus after the record P88 billion in January. The month of April is typically an excess, but lower year-on-year this time, despite the tax season following the annual income tax return filing.

Still, a budget surplus means that the government earned more than what it spent during a given time. The extra money can either be used to pay off debts or be invested in other programs.

According to Nomura, the April fiscal deficit data surprised on the upside due to higher revenue collection and expenditure.

Total revenue collection in April jumped by 22 percent to P537.2 billion as against the P440.7 billion in the same period last year, while government spending rose by 32 percent to P494.5 billion from P373.9 billion a year ago.

This was driven by higher releases of the national tax allotment and subsidies to state-run corporations, as well as the release of the fourth tranche of capitalization of the Coconut Farmers Industry Trust Fund.

“We believe this also suggests increasing capital outlays after erratic infrastructure progress in the last few months. As a result, on a 12-month rolling sum basis, the fiscal deficit remained at 6.1 percent of GDP, unchanged from the previous month,” Nomura said.

Year to date, the government incurred a higher budget deficit of P229.9 billion, up 13 percent from P204.1 billion in the same period in 2023.