The Philippines : Fiscal Behavior In Recent History

The Philippine national government experienced large and unsustainable budget deficits in the 1980s. After a brief period of near balanced budget in the mid-1990s, large budget deficits have reemerged in recent years. But unlike the heavy fiscal imbalances in the early 1980s which were caused by large investment in public infrastructure and low tax effort, the return of large fiscal deficits in recent years was accompanied by falling tax effort and underspending for education, health and public infrastructure. With deficits rising and investment in human capital and public infrastructure deteriorating, an appropriate question is: what has caused the poor fiscal performance of the Philippines in recent years? Is it the result of unfortunate events, macroeconomic shocks or misdirected fiscal policy?