MANILA, Philippines - The government is sticking to its program of containing the budget deficit to no more than two percent of the domestic economy from 2013 until the end of President Aquino’s term in 2016, the Department of Budget and Management said.
"The fiscal year 2014 budget will continue the policy of fiscal consolidation which calls for the downscaling of the national government budget deficit to two percent of GDP (gross domestic product) from 2013 to 2016," DBM secretary Florencio Abad said in a memorandum.
An indicator of economic performance, GDP is the amount of final goods and services produced in a country while fiscal deficit is the amount by which the government’s total expenditures exceed the revenue that it generates.
The deficit-to-GDP ratio, on the other hand, is a measure of the ability of a country to sustain revenue shortfalls.
The country reported a budget deficit of P127.3 billion from January to November 2012, less than half the P279 billion ceiling targeted by the government on the back of higher revenue collections and prudent spending. The amount accounted for 2.6 percent of the country’s GDP.
In the 11 months to November 2012, the government registered revenues of P1.41 trillion, up 13 percent year on year.
“In view of the continuing economic weakness of Europe and the United States, it will be prudent for the government to strengthen its fiscal position and sustain its fiscal reforms,” Abad said.
The government is also relying on tax reforms to trim the public deficit. It intends to raise its revenue collection effort to around 17 percent of GDP by 2016.
“The ultimate objective is to reduce the public debt and increase the government’s tax take to levels comparable with peer countries for a stronger and healthier fiscal position,” Abad said.
In the first half of 2012, the government’s tax effort increased to 13.3 percent of GDP from 12.7 percent in the same period a year earlier despite the absence of any new revenue measure.
With the passage of the controversial Sin Tax bill late last year, the government is expected to raise an additional P44 billion in tax revenues a year over the next five years.
The government intends to use proceeds of the sin tax reform law for the universal health program and the livelihood, training, and assistance needs of tobacco farmers and workers in the alcohol industry.