Growth, fiscal goals need to be ‘more realistic,’ says DoF chief

The Development Budget Coordination Committee (DBCC) may need to adjust its growth and fiscal targets to be “more realistic,” Department of Finance (DoF) Secretary Ralph G. Recto said last week.

“We’re discussing that right now because I think we have to come up with more realistic targets,” Mr. Recto told reporters on the sidelines of an event on Thursday.

“Don’t you think we need some adjustment there? I think we need to. Something more realistic but still high for 2024 and beyond,” he added.

The government is targeting gross domestic product (GDP) growth of 6.5-7.5% this year and 6.5-8% from 2025 to 2028 under the DBCC’s latest macroeconomic assumptions and medium-term fiscal and growth goals.

The economy grew by 5.6% in 2023, slower than the 7.6% expansion in 2022. It also fell short of the government’s 6-7% goal for the year.

“We are reviewing all of that. It’s a six-year term for the President and we’ve finished one year and a half. We know what’s happening globally, so we have an idea of something more realistic,” the DoF chief said in mixed English and Filipino.

National Economic and Development Authority Secretary Arsenio M. Balisacan earlier said it could be too early to adjust their economic growth targets.

“It’s only the first (quarter) of the year and now you want to say reduce the 6.5% — that’s too defeatist,” he said.

Meanwhile, the Finance chief said the entire medium-term fiscal framework is also under review.

“The fiscal plan was made when (Ferdinand R. Marcos, Jr.) became president in 2022. There was no war in the Middle East, the Ukraine war had just begun. Thereafter, prices of food and oil rose,” Mr. Recto said. “That plan was done way back a year and a half ago. It’s always under review and more so today.”

The DBCC expects the National Government’s budget deficit to hit P1.39 trillion this year, equivalent to 5.1% of GDP. Broken down, revenues are expected to reach P4.24 trillion while disbursements are seen to hit P5.63 trillion.

Under the fiscal framework, revenues are programmed to account for 15-16% of GDP, while expenditures are equivalent to around 20% of GDP.

Mr. Balisacan also said earlier that the contraction in state spending in the fourth quarter was “intentional” due to the government’s fiscal consolidation plan. In the fourth quarter, government spending contracted by 1.8%, a reversal of the 6.7% growth in the previous quarter and 3.3% a year ago.

Mr. Recto noted that the government is not planning on cutting back on its expenditures.

“I’m not considering slower spending. At the very least we will keep the spending level at whatever it is right now under the DBCC program. Hopefully, we can even improve it. For as long as the deficit is going down and your debt-to-GDP ratio is going down, that’s what is important,” he added.

The DBCC last reviewed its targets in December. Its next meeting is scheduled in March.

TAX REVENUES

Meanwhile, the Bureau of Internal Revenue (BIR) said streamlining tax processes to attract more investments could mean foregone revenues for the government, which it will need to make up for by intensifying collection efforts in other areas.

“That’s the challenge, as we try to improve the process and implement the ease of paying taxes, of course we may lose revenues because of all the improvements,” BIR Commissioner Romeo D. Lumagui, Jr. told reporters on the sidelines of an event on Thursday.

“As we want to grow the economy, we’ve been giving incentives. We’ve been lenient on those in the hopes we will be able to attract investors. There are lost revenues in the meantime, so there is a lot we need to do to set off those revenue losses.”

For example, Mr. Lumagui said the agency will be focusing on improving excise tax collection this year, especially on tobacco and vape products.

“For this year, that will be our concentration, excise tax. We’ve analyzed what happened in 2023,” he said.

Mr. Lumagui earlier said there was an estimated 20% shortfall in excise taxes in the first four months of 2023 due to illicit tobacco.

“So many are shifting to vape. Hopefully, vape product registration will increase. Last year, we saw an increase in registrations because of what we’ve done, so hopefully it will increase this year,” he added, noting that the excise tax collection shortfall has been trimmed to about 13-14% at the end of 2023.

Data from the BIR showed it generated P137.18 billion in revenues from operations targeting the illicit trade of cigarettes, vape and other excisable articles in 2023.

The BIR collected around P2.53 trillion last year, missing its PHP 2.64-trillion target for 2023 but surpassing its PHP 2.34-trillion collection in the previous year.

This year, the agency is tasked to generate PHP 3.05 trillion in revenues.

Mr. Recto also ordered the agency to accelerate its digitalization and modernization programs to make tax compliance easier.

“Additionally, we will strengthen enforcement efforts against tax cheats and ensure fairness in the tax system to build taxpayers’ trust,” he added. — Luisa Maria Jacinta C. Jocson