Department of Finance (DOF) Secretary Ralph Recto said Monday the government is on track to meeting its fiscal goals to gradually lower deficit and debt, create more jobs, increase income and reduce poverty.
“When I took on the Finance Secretary hat, my first priority was to recalibrate our growth and fiscal targets to ensure that they are achievable and adaptable to external shocks. Our refined Medium-Term Fiscal Program reduces our deficit and debt gradually in a realistic manner; while creating more jobs, increasing our people’s incomes and decreasing poverty in the process,” Recto said during the FY 2025 national budget deliberations on Aug. 5, 2024.
The program took into account ongoing external trends that heavily influence the global economy while still recovering from the pandemic such as geopolitical tensions.
“And under this, we have ensured that every peso to be collected or borrowed will be stretched to deliver the biggest bang per buck for the Filipino people,” he said.
He said to fund the P5.77-trillion government budget in 2024, the DOF scouted for more resources without imposing new taxes on the people or passing debts to be paid by future generations.
Recto said this is why the DOF hiked the government-owned and -controlled corporations’ (GOCCs) dividend rates to 75 percent from 50 percent in 2024.
The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) posted higher collection through digitalization, strict enforcement and plugging of tax leakages, especially from e-commerce, he said.
Total revenue collection from January to June grew by 15.6 percent to P2.15 trillion. Of this amount, tax collections increased 10 percent to P1.84 trillion, while non-tax grew surged 63.3 percent to P314.2 billion.
This placed the Philippines second in Asia in terms of revenue efforts with a revenue-to-GDP (gross domestic product) ratio of 15.3 percent in the first quarter of 2024.
Expenditures also grew 14.6 percent in the same period, reaching P2.76 trillion. In the first quarter of 2024, expenditure-to-GDP stood at 19.7 percent.
The fiscal deficit remained manageable at P613.9 billion, below the mid-year target. As a percentage of GDP, the deficit stood at 4.5 percent in the first quarter of the year.
Recto said over the medium term, the government expects revenues to grow by an average of 10.3 percent annually. Revenues as a percentage of GDP will also increase from 16.1 percent in 2024 to 17 percent by 2028, he said.
Tax collections are expected to rise by 11.8 percent annually, driven by projected double-digit collection growths of the BIR and BOC. This will outpace the roughly 8.7 percent average increase of nominal GDP every year from 2024 to 2028.
“This means that we are asking the BIR and BOC to work harder and boost efficiency at a faster pace,” Recto said.
By 2028, the tax effort is anticipated to rise to 16.3 percent from 14.4 percent in 2024.
Recto said the projections considered the additional revenues from the refined revenue reforms of the DOF, which were recalibrated to ensure that they do not place undue burdens on the taxpayers.
Disbursements are expected to grow by an average of 7.4 percent, but remain at about 21.1 percent of the GDP.
“With higher government revenue collections and improved expenditure management, fiscal deficit is projected to drop from 5.6 percent in 2024 to 3.7 percent by 2028,” Rectos said.
The government’s spending program will continue to prioritize education, infrastructure, food security, social protection, and national security to support the country’s growth momentum.
Recto assured the lawmakers that the government is continuously managing the country’s debt according to the highest standards of fiscal discipline.
He said that as of June 2024, the gross financing stood at 61 percent of the full-year goal of P2.57 trillion. This included the landmark $2-billion global bond issuance in May, one of the government’s most affordable and cost-efficient borrowing modes.
The country’s heavy bias on domestic financing facilitated the continued redenomination of the national debt into local currency, now representing 68.3 percent of total borrowings.
The DOF also strategically favors long-term obligations to reduce the government’s reliance on short-term debt and minimize rollover risks. Currently, long-term debts constitute 79.8 percent of the country’s total portfolio.
Recto assured the public that there is no cause for concern regarding the Philippine government’s total outstanding debt because the size of the country’s economy is large enough to allow the government to generate without difficulty the resources needed to meet its debt obligations.
He said that as with private individuals, debt should be viewed relative to repayment capacity which, in the case of governments, are measured by the size of their respective economies.
One global standard metric is looking at the ratio of a country’s nominal outstanding debt over its gross domestic product (GDP), or the value of goods and services produced locally in a given period.
The Philippines’ debt-to-GDP ratio began to decline from its post-pandemic peak of 60.9 percent in 2022 to 60.1 percent in 2023. The DOF targets to push this ratio even lower to below 60 percent over the medium term.
Recto said while the country’s total nominal debt continues to rise, it merely reflects the conscious decision to run fiscal deficits to be able to accommodate growth-enhancing investments in infrastructure modernization, human capital development, and social protection while paying off the pandemic borrowings it inherited from the past administration.
