Government urged to keep spending, avoid high surplus

March 19, 2024 | 12:00am

MANILA, Philippines — The government should not keep a high surplus and instead continue to ramp up spending in order to meet the growing needs of the economy, an economist said.

Leonardo Lanzona, labor economist and professor at the Ateneo De Manila University, warned the government of maintaining a high surplus as this could impact on growth.

“Under the circumstances, it may not be advisable to keep a high surplus,” Lanzona told The STAR.

“I would think the surplus will continue but the government needs to meet the needs of a growing economy especially as the country tries to reach upper middle-income status,” he said.

This as the government incurred a higher budget surplus of P88 billion in January, nearly double the P45.7 billion recorded in the same period last year.

The January surplus was also the highest recorded since the Treasury started keeping track of cash operations data of the government in 1986.

A budget surplus means that the government earned more than what it spent during a given time. The extra money can either be used to pay off debts or be invested in other programs.

“A manageable deficit seems the more ideal case given the objective. But the BSP (Bangko Sentral ng Pilipinas) has forced the government to this surplus,” Lanzona said.

He explained that the high interest rate policy led to decreased borrowing and spending by consumers and businesses as well as the government.

As such, a reduction in spending can result in lower inflation, which is the BSP’s primary goal, and a slower economy.

Total revenue collection in January jumped by 21 percent to P421.8 billion while expenditures only rose 10 percent to P333.9 billion.

Finance Secretary Ralph Recto already kept his stance of no new taxes, at least for the year, with the government bent on focusing on tax administration instead.

“The no new taxes stance of Recto is an attempt to spur more spending from consumers and firms [rather than the government],” Lanzona said.

Last year, the budget deficit eased to P1.51 trillion. The deficit, when measured against the gross domestic product (GDP), also cooled to 6.2 percent.

For 2024, the government intends to further cut this to P1.39 trillion or 5.1 percent of GDP. By the end of the Marcos administration, the deficit-to-GDP ratio is targeted to return to pre-pandemic level of three percent.