A first look at the medium-term fiscal program - BusinessWorld Online

By Romeo L. BernardoI am pleased to share with readers a post that Christine Tang and I wrote for Globalsource Partners , an inter-agency body made up of the departments of budget, finance, planning and the BSP , presented the new administration’sscal program for 2022 to 2028. The medium-term program hinges on the economy sustaining its growth clip at 6.5% to 8% starting 2023 and inflation returning to the BSP’s 2% to 4% target starting 2024.

The reduction in the deficit and debt ratios to GDP will be done through a combination of raising revenues and cutting expenditures relative to GDP. The revenue eort is programmed to rise from 15.5% last year to 17.6% by 2028 or an increase of 2.1 ppt, while spending as a share of GDP is programmed to fall from 24.1% last year to 20.6% in 2028, equivalent to a decrease of 3.5 ppt. Despite the reduction in expenditures, government intends to keep infrastructure spending at 5% to 6% of GDP.

2. Sources of new revenues that will keep revenue growth above nominal GDP growth from 2023 onwards. The Finance secretary said recently that the economic team will pursue the remaining tax packages of the Duterte administration, dealing with property valuation and financial sector taxation which, while revenue neutral, will make the tax system more efficient. He is also in favor of imposing taxes on digital transactions but did not specify expected revenue inflows.

We await the President’s State of the Nation Address later this month where he is expected to present his administration’s economic program.Although we expect GDP growth this year to reach 6.8% , we think the government’s 6.5% to 8% growth target through 2028 is rather ambitious.

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