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MANILA, Philippines – The government is on track to meet its target of keeping the budget deficit at 2% of the economy until President Benigno Aquino III’s term ends, the Development Budget Coordination Committee (DBCC) said.

DBCC, the inter-agency body that sets the country’s macroeconomic assumptions, programmed a deficit of P238 billion for 2013 and P266.2 billion for 2014, both equivalent to 2% of gross domestic product (GDP).

“We remain committed to our fiscal consolidation strategy, which should help us reduce our debt stock and create more fiscal space for programs and projects that support inclusive economic growth,” Budget and Management Secretary Florencio Abad said.

The deficit represents the difference between government revenues and expenditures. In 2012, the deficit ceiling was set at P279.1 billion or 2.6% of GDP. Preliminary figures however showed the budget gap was only P253.3 billion for the year or 2.2% of GDP.

The country borrows from domestic and international debt markets to fund the deficit.

Abad said while the deficit increased nominally over the last 3 years, the government expects its debt burden to decrease by an average of 1.2 percentage points annually.

The DBCC sees a debt-to-GDP ratio of 46.2% in 2014, down from 50.9% in 2011.

Gov’t spending

The government needs to incur a deficit so it can spend more for vital infrastructure and social services, and spur the economy.

Abad said the government eyes a P2.29-trillion disbursement program for 2014, equivalent to 17.2% of GDP. This is a significant increase from the P1.98-trillion target for 2013.

“We intend to further improve the pace, efficiency, and quality of public expenditures,” he said.

“We plan to bolster spending for public infrastructure, as well as drive more investments toward the agri-fisheries, manufacturing, and transportation industries, among other promising sectors,” he added. – Rappler.com