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Fitch Ratings has projected broader relationships between the budget deficit and general government debt and gross domestic product (GDP) of the Philippines this year, still due to the 2019 coronavirus disease (Covid-19) pandemic.
In a report on Friday, Fitch Ratings analyst Sagarika Chandra said the government’s fiscal deficit could rise to 7.5 percent of total national production this year “as spending on Covid-19-related measures increases and the income diminishes with the contraction of the GDP “.
The forecast is broader than 3.2 percent in 2019, but narrower than the government’s official assumption of 9.6 percent.
Chandra said the outlook “incorporates spending measures for vulnerable groups and businesses affected by the pandemic, amounting to around 4 percent of 2020 GDP, and included in the authorities’ four-pillar socio-economic program against the pandemic.” .
Previously, the Finance Department reported that so far the government has allocated P2.06 trillion, equivalent to 11 percent of GDP, for its four-pillar strategy against the pandemic. The amount covers the provision of emergency and wage subsidies for poor and low-income households, small business employees, and other vulnerable groups; pool the country’s medical resources and ensure the safety of the first in health care; fiscal and monetary actions to finance emergency initiatives and keep the economy afloat; and an economic recovery plan to create jobs and maintain growth after the pandemic.
The latest data showed that the government incurred a budget gap of P740.7 billion in the first eight months of 2020, wider than the P120.4 billion in the same period in 2019.
Over the next two years, Fitch Ratings forecasts a gradual decrease in the deficit in 2021 and 2022 to 6.9 percent and 5.8 percent of GDP, respectively.
Meanwhile, it projects that the country’s general government debt-to-GDP ratio will rebound to around 48 percent of total national output this year, down from the 34.1 percent recorded last year, and compares to the ceiling. 50 percent programmed by the government.
“[T]l The Philippines entered the crisis with fiscal space due to its relatively low debt ratio in 2019. Furthermore, the authorities’ record of macroeconomic management lends credibility to their medium-term consolidation plans, ”said Chandra.
The government’s outstanding debt is estimated to exceed the $ 10 trillion mark by the end of the year as it plans to borrow more.
According to the report “Expenditure budget and financing sources for 2021” of the Department of Budget and Management, state obligations will reach P10.16 trillion by the end of 2020, 31.42% more than the liabilities of P7.73 trillion. late last year. .
Domestic debt is projected to reach P6.91 trillion, an increase of 34.84 percent from P5.12 trillion at the end of 2019, accounting for the bulk of outstanding obligations. External liabilities will increase by 24.67 percent to P3.24 trillion from P2.60 trillion last year.
The Treasury office previously reported that the government’s outstanding debt rose to a record P9.61 trillion at the end of August due to accelerated domestic and foreign loans.
Finance Secretary Carlos Domínguez 3rd has said the Philippines is able to repay its growing number of loans that were used primarily to support the government’s response to the pandemic.
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