The Administration’s Objective to Reduce the Fiscal Deficit to 3% of GDP by 2028: Why and how?

• Main Author: Felipe, Jesus
• Format: text
• Published: Animo Repository 2023
• Subjects: Philippines; Economy; Fiscal Management; GDP; Growth; Growth and Development; Work, Economy and Organizations
• Online Access: https://animorepository.dlsu.edu.ph/res_aki/95; https://animorepository.dlsu.edu.ph/context/res_aki/article/1083/viewcontent/DLSU_AKI_Policy_Brief_2023_06_002.pdf
• Institution: De La Salle University

A few weeks ago, the author attended a presentation on the Philippine economy and prospects for 2023. A discussant from the Department of Finance indicated that the Administration aims at reducing the fiscal deficit from 8.6 percent of gross domestic product in 2021 (the result of the COVID pandemic) to 3 percent by 2028. She referred to this reduction as “solid fiscal management” that “will promote long-term growth". This article argues that this is a dubious target because the government cannot control the deficit. Moreover, claiming that this reduction will promote long-term growth is poor economics. So is the idea of “fiscal responsibility” based on the false premises that sovereign governments have limited financial resources (operate with financial constraints) or that they risk “running out of money.”