The Development Budget Coordination Committee (DBCC) revisited the country’s macroeconomic assumptions, growth targets, and fiscal program for FYs 2021 to 2024, in preparation for the President’s submission of the proposed FY 2022 National Budget to the Congress.
Real Growth Projections
Amid the declining number of COVID-19 cases in the country since the peak in April 2021 and the gradual reopening of the economy with more targeted granular lockdowns, the DBCC reaffirmed the Gross Domestic Product (GDP) growth target of 6.0 to 7.0 percent in 2021, 7.0 to 9.0 percent in 2022, and 6.0 to 7.0 percent in 2023 and 2024.
To support this outlook, the DBCC emphasized its support to manage risks and continue the gradual and safe reopening of the economy, subject to the strictest compliance to minimum public health standards. The intensified implementation of the prevent, detect, isolate, treat, and recover (PDITR) strategy, along with the full vaccination of residents in high-risk areas, will help build consumer and business confidence, and improve our health system capacity and prevent community transmissions of the Delta variant.
The relaxation of quarantine restrictions in high-risk areas must be complemented with an accelerated vaccination roll-out, in order to allow more businesses to operate and consumers to participate in socio-economic activities.
The DBCC also noted that a total of PhP665.72 Billion had been released to fund the government’s COVID-19 response and to mitigate the losses of low-income households, small businesses, and other vulnerable sectors.
With these actions, the DBCC is optimistic that the country’s GDP may return to its pre-pandemic levels as early as 2022. The DBCC will review the GDP growth projections after the release of the Q2 GDP in August.
Macroeconomic Assumptions
The DBCC approved the revisions to selected macroeconomic assumptions based on the latest emerging data.
For the growth of goods exports for this year, the projection was adjusted from 8.0 percent to 10.0 percent following the expected recovery in external demand. Meanwhile, the outlook for the growth of services exports in 2022 was revised from 6.0 percent to 7.0 percent in line with the projected improvements in travel and BPO receipts due to the gradual reopening of the economy.
Other macroeconomic assumptions from the 179th DBCC meeting were maintained.
Medium-Term Fiscal Program
Revenue projections for the medium-term were retained at PhP2.88 trillion for 2021 (14.5 percent of GDP), PhP3.29 trillion for 2022 (14.9 percent of GDP), PhP3.59 trillion for 2023 (14.8 percent of GDP), and PhP4.0 trillion for 2024 (15.1 percent of GDP).
The estimated disbursements for 2021 and 2022 were also kept at PhP4.74 trillion (23.9 percent of GDP) and PhP4.95 trillion (22.4 percent of GDP), respectively. On the other hand, disbursements have been adjusted downwards to PhP5.02 trillion (20.7 percent of GDP) in 2023 and PhP5.30 trillion (19.9 percent of GDP) in 2024 due to the revised projections for the National Tax Allotment (NTA).
Meanwhile, the infrastructure program disbursement for 2022 is projected to increase to PhP1.29 trillion, equivalent to 5.8 percent of GDP, from PhP1.25 trillion original estimate. It will slightly taper off to PhP1.28 trillion (5.3 percent of GDP) in 2023 following the updated projections for the NTA and BARMM Block Grant, and will reach PhP1.35 trillion (5.1 percent of GDP) in 2024. The infrastructure program will average 5.4 percent of GDP over the next three years.
The deficit program for 2021 is retained at 9.3 percent of GDP. Over the medium-term, the deficit path will be on a downward trajectory with 7.5 percent in 2022, 5.9 percent in 2023, and 4.9 percent in 2024. This fiscal consolidation strategy will continuously be adopted by the government to ensure fiscal sustainability over the medium-term and to bring back the country’s deficit to pre-pandemic levels.
FY 2022 National Expenditure Program
Consistent with the macroeconomic assumptions and foregoing fiscal targets, the DBCC approved the expenditure ceiling of the FY 2022 National Expenditure Program at PhP5.024 trillion. This is higher by 11.5 percent than the FY 2021 National Expenditure Program.
The proposed 2022 national budget will continue to invest in building the country’s resilience amidst the pandemic by prioritizing funding for COVID-19 response measures, such as healthcare development and social services, while also ramping up economic growth through investments in public infrastructure.
Closing
The DBCC remains committed to restoring jobs and building a stronger and more competitive economy, while sustaining the Duterte Administration’s legacy of real change for future generations.
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