From the Sidelines
By: Ray G. Talimio Jr.
Two decades. That’s how long the Philippines has been caught in a cycle of chronic budget deficits. Each year, our national budget rolls out with built-in shortfalls and the hope that economic growth or better tax collections will eventually narrow the gap. But as the data shows—both in our national accounts and in comparison with regional neighbors—our inability to rein in deficits has become a structural issue, not just a seasonal problem.
For 2024, the country posted a fiscal deficit of ₱1.506 trillion, equivalent to 5.7% of GDP, slightly down from 6.2% in 2023. The trend may appear to be improving on paper, but this marginal decline is far from reassuring. Despite the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) posting higher collection targets for 2025—₱3.232 trillion and ₱1.06 trillion respectively—these still fall short of the pace needed to catch up with ever-growing expenditure levels. Worse, unprogrammed appropriations, which are supposed to be contingent on excess revenue or foreign loans, have ballooned past ₱500 billion—essentially forming a second budget that bypasses Congressional scrutiny.
In stark contrast, our ASEAN neighbors—while not all posting surpluses—have demonstrated far stronger fiscal discipline. Singapore leads with a budget surplus of 0.7% of GDP, while Indonesia has cut its deficit to 2.4% post-pandemic. Thailand has maintained its deficit at 3.5%, Malaysia at 5.0%, and Vietnam at 4.5%. Compared to the Philippines’ 6.2% in 2023, we remain the region’s outlier. These countries are gradually consolidating their fiscal positions, balancing economic recovery with long-term sustainability, while we continue to normalize overspending and overborrowing.
The Development Budget Coordination Committee (DBCC), which crafts the fiscal framework each year, has failed to correct this imbalance. Instead of setting aggressive yet achievable revenue targets or decisively trimming non-essential spending, it adopts a conservative, almost defensive posture. Its projection of a 9% increase in revenues for 2026 looks more like a placeholder than a fiscal course correction. This is alarming considering the country’s debt-to-GDP ratio stands at around 60.2% and interest payments consume nearly 20% of our annual budget. The danger here is not just the size of the deficit, but the complacency that surrounds it.
The Department of Finance (DOF) has tried to advance structural reforms, such as a graduated Capital Gains Tax (CGT) increase and other components under the Comprehensive Tax Reform Program (CTRP), but these remain in legislative limbo. Despite this, budget projections are made as though these tax measures are already enacted, creating a false sense of fiscal security. This disconnect between policy aspiration and legal implementation continues to erode the credibility of our national budgeting process.
More troubling is the way unprogrammed appropriations are treated—not as contingency funds, but as a mechanism to fast-track pet projects, political commitments, or off-budget initiatives. This undermines the entire Tier 2 budgeting framework, which was designed to fund programs only when revenues exceed targets or foreign funding becomes available. Now, it has become a loophole.
This deficit trap persists because of a broken feedback loop: tax revenues grow slower than expenditures; borrowing fills the gap; and new debts feed future deficits. The political culture reinforces this, where spending is mistaken for performance, and debt is marketed as development. But this cycle is unsustainable, especially when productivity and exports are not growing in tandem.
It’s time the DOF and DBCC pivot from reactive management to proactive correction. We need to:
• Set ambitious yet attainable revenue targets based on compliance improvement, digital transformation, and tax justice.
• Rein in unprogrammed appropriations and require Congress to subject these to stricter scrutiny.
• Legislate fiscal rules such as a cap on annual deficit-to-GDP ratio and a fixed ceiling on debt servicing.
• Move from input-based budgeting to outcome-based public investment planning.
• Most importantly, restore fiscal credibility by aligning budget projections only with enacted laws and secured funding.
We’ve normalized the abnormal. That’s the real crisis. Two decades of chronic deficits should not be a footnote in budget documents—it should be a national alarm bell. Our fiscal authorities must recognize that their stewardship is not just about raising funds or allocating budgets; it is about securing the economic future of the nation. We cannot borrow our way to prosperity, especially when interest payments are beginning to crowd out vital services.
There is still time to course-correct. But the first step is to acknowledge that the problem is not just cyclical—it is systemic. And it requires more than tweaking—it requires reform. Real, rules-based, transparent fiscal reform.
Photo credits: Department of Finance Philippines (April 14–15, 2025 budget briefings)
Sources: AMRO Asia, BWorld, PortCalls, GMA News, official DBCC and DOF data
Disclaimer: This column is intended for public information and policy dialogue purposes only. The views expressed are those of the author and do not represent the official position of any agency or institution with which he is affiliated.
About the Author:
Ray G. Talimio Jr. is Chairman of BIMP-EAGA for Northern Mindanao, Co-Chairman of the Regional Development Council-X Economic Development Committee, and Chairman of the MSME Development Council of Cagayan de Oro and Misamis Oriental. He has been involved in policy reform initiatives on taxation, public finance, innovation, and MSME development, contributing to dialogues between government, business, and civil society.
