By Beatrice M. Laforga, Reporter

THE National Government’s budget deficit ballooned to 7.5% of gross domestic product (GDP) last year from 3.4% in 2019, but slightly below the cap set by the economic team, as spending increased and revenues slumped amid the coronavirus disease 2019 (COVID-19) pandemic.

In a speech at the virtual meeting of the Management Association of the Philippines (MAP) on Tuesday, Finance Secretary Carlos G. Dominguez III said preliminary data showed last year’s budget deficit reached P1.36 trillion or equivalent to 7.5% of GDP, more than double the 3.4% deficit-to-GDP ratio in 2019.

Last year’s fiscal gap surged to a fresh all-time high, or twice as much as the previous record of P660 billion in 2019.

However, the 2020 deficit was still slightly below the P1.38 trillion or 7.6% of GDP limit set by the Development Budget Coordination Committee (DBCC) in December.

Broken down, Mr. Dominguez said overall spending reached P4.205 trillion last year, up 11% from P3.797 trillion in 2019. The total expenditures were 0.66% below the P4.233-trillion goal.

The Finance chief said total revenues reached P2.842 trillion, down by 9.5% from P3.138 trillion a year earlier, and 0.39% short of the P2.853-trillion target. Tax collections accounted for 87.6% of the total.

“We appreciate the importance of continuing fiscal discipline to ensure the resilience of our economy. The public health emergency could last for months or possibly years. The battle against COVID-19 is going to be a marathon, not a sprint. While we hope for the best, we must be prepared for the worst,” Mr. Dominguez said.

To plug the funding gap, the government borrowed P2.64 trillion from local and foreign lenders last year, excluding the P540 billion borrowed from the Philippine central bank which has been fully settled last month.

This pushed the country’s debt stock to 53.5% of GDP at the end of 2020, surging from the record low 39.6% in 2019 but lower than the projected 53.9% level for the full year.

The DBCC has capped the fiscal deficit to 8.9% of GDP for 2021, with gross borrowings seen to reach P3.03 trillion.

“We expect the National Government’s debt to settle at 57% of GDP this year. Even with the upscaling of our borrowing plan, we will still be able to keep our debt ratio within a sustainable threshold. This gives us the advantage over economies who were already saddled with heavy debt prior to the crisis,” Mr. Dominguez said.

“We remain confident that we can easily fulfill our funding requirement for this year,” he added.

ING Bank N.V. Manila Branch Senior Economist Nicholas Antonio T. Mapa said the data showed that earlier estimates of the economic team that the deficit will hit as high as 9% of GDP is not possible, proving the government still has enough fiscal room to boost spending to prop up the economy.

“We will expect the deficit-to-GDP ratio to beat its target yet again as the government continues to rein in spending to maintain its fiscal metrics,” Mr. Mapa said via e-mail on Tuesday.

University of Asia and the Pacific Senior Economist Cid L. Terosa said the “shortfall in the revenue and spending programs of the government would have shoved 2020 GDP growth a bit higher because of its inherent potential multiplier effects and capacity to expand production, employment, and income.”

Mr. Terosa also expects the government to reach the budget deficit cap this year, highlighting the need to boost spending to help the economy recover faster.

“Lack of spending (in 2020 and this year), however, will mean that the Philippine economy will likely remain stuck in low gear with both household spending and capital formation still impaired by the ongoing recession,” Mr. Mapa said.