2024 budget deficit likely to be within ceiling

By Aubrey Rose A. Inosante, Reporter

THE National Government’s (NG) budget deficit likely came in within the P1.52-trillion ceiling in 2024 as spending expected to have surged in December, analysts said.

“Possible, as a function of government spending growth, which tends to pick up towards the end of the year, as seen in recent years,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The Bureau of the Treasury reported that the budget deficit widened to P1.18 trillion in the first 11 months, from P1.11 billion a year earlier.

In November, the budget deficit more than doubled to P213 billion due to weak revenue collections and a pickup in spending.

Mr. Ricafort noted that the risk remains of a breach of the ceiling with large budget deficits of at least P300 billion posted every December since 2020.

He noted the “record monthly budget deficit” of P401 billion posted in December 2023.

John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said the NG is “likely to hit its P1.5-trillion deficit ceiling for 2024.”

“While spending will increase, stronger-than-expected revenue collections and efforts to manage non-essential spending might help keep the deficit within target,” Mr. Rivera said via Viber message.

He also said the budget deficit for the remaining month will “remain elevated” but expects revenue to improve towards year’s end due to corporate tax settlements and other collections, “but may not be enough to offset the spending surge.”

He called the P4.38-trillion revenue target “challenging but achievable” if the collections in the last month remain strong.

“This is because December typically sees a surge in government spending, particularly for infrastructure projects, social services, and year-end bonuses for government employees. This seasonal trend will likely push spending higher,” he added.

“The projection in the Philippine Development Plan is for the budget deficit to be lower this year due to increased tax take, but we will still have an actual deficit,” Ateneo School of Government Dean Philip Arnold P. Tuaño told ����ý on Wednesday.

A surplus — in which government revenue outweighs spending, would be difficult this year, he said.

“Since this is an election year, we expect expenditures to significantly increase at the start of the year before slowing just before elections,” Mr. Tuaño said.

Meanwhile, Public finance expert Zyza Nadine M. Suzara said the actual deficit will depend largely on the government’s spending efficiency.

She said that the NG often accelerates its disbursements towards the end of the year to prevent unspent funds from being returned to the Treasury.

However, Ms. Suzara said a lower-than-programmed deficit is also not necessarily a good thing especially if revenue targets are not exceeded.

“Since the government isn’t actually expecting excess revenue, the lower-than-programmed deficit might be due to inefficiency,” she added.

For 2025, the budget deficit may narrow slightly but will remain substantial, Mr. Rivera said, due to increased revenue collections from tax measures such as the value-added tax (VAT) on digital services and measures targeting luxury consumption.

President Ferdinand R. Marcos, Jr. recently signed Republic Act No. 12023, which imposes a 12% VAT on foreign digital service providers and aims to collect P105 billion between 2025 and 2029.

He also said that stronger economic growth this year could boost revenue but any slowdown whether due to global headwinds or domestic challenges could negatively affect collections.

“The expected deficit in 2025 will be slightly less than P1.200 trillion so the required financing might be lower,” Mr. Tuaño said, adding that lower interest rates in the previous months allow the NG to raise the needed resources.