The incoming administration of presumptive president Ferdinand “Bongbong” Marcos Jr. will have a full-year budget of P5.268 trillion to spend in 2023, Department of Budget and Management (DBM) officer-in-charge Tina Rose Marie Canda announced Tuesday.
Canda revealed the proposed national budget in a virtual press briefing following the 181st meeting of the inter-agency Development Budget Coordination Committee (DBCC) composed of the country’s economic managers.
The proposed budget next year is equivalent to 22.1% of the country’s gross domestic product, according to Canda, who chairs the DBCC and read their joint statement.
The committee also said Tuesday it lowered its gross domestic product (GDP) growth estimate this year to 7 to 8 percent from the previous assumption of 7 to 9 percent.
The DBCC said this accounts for the continuing external risks, particularly the war in Eastern Europe and monetary policy normalization in the United States.
The budget ceiling approved by the economic managers is higher than the P5.242-trillion pegged by the economic team in December 2021.
The DBCC is composed of the heads of the National Economic and Development Authority, DBM, and Department of Finance, as well as the governor of the Bangko Sentral ng Pilipinas (BSP).
The other reason for the downward GDP revision for 2022 was the slowdown in China, the group said after its meeting.
The economic team, according to Canda, set the cap P5.268-trillion cap for 2023 national budget due to higher projected revenue collections next year.
“As economic activity is expected to continuously pick up over the medium-term, revenue projections were revised upward to P3.633 trillion (15.3% of GDP) for 2023,” the DBM chief said.
Likewise, the economic managers pegged next year’s disbursements to reach P5.086 trillion or 21.3% of GDP.
The DBCC also maintained its target fiscal deficit at 6.1% of the economy for 2023, according to the DBM chief.
Canda said the incoming administration has to stick to the P5.268-trillion budget ceiling “for prudent fiscal management.”
“It may be tight, but we have live within that level if we want to be respected in the international financial community,” the DBM chief, who also chairs the DBCC, said.
“However, we can tweak within the budget. The cap is not set in stone, the composition can actually change. If we want to be true to our word of having good fiscal management we will stick to that level,” Canda said.
“The Philippine economy’s strong recovery in the first quarter of 2022 [of 8.3 percent] has moved us closer to our goal of achieving at least 7.0 percent growth this year,” the group statement read.
“However, in light of heightened external risks such as the Russia-Ukraine conflict, China’s slowdown, and monetary normalization in the United States, the full-year growth target was slightly revised from 7.0 – 9.0 percent to 7.0 – 8.0 percent for 2022,” DBCC said.
“Meanwhile, real GDP growth was retained at 6.0 – 7.0 percent for 2023 to 2025 as the economy is expected to sustain its strong recovery in the medium term,” it said.
Economic Planning Secretary Karl Chua said external risks might affect economic expansion in the second quarter.
“Domestic demand is positively contributing to higher growth… but external risks may offset the domestic demand,” Chua said.
The committee said shifting the entire country to COVID-19 Alert Level 1, increasing the vaccination rate, especially for seniors and children, and reopening all face-to-face classes are crucial to further strengthen domestic demand, cushion the impact of external events, and achieve the growth targets.
The DBCC also approved some revisions to the macroeconomic assumptions based on emerging data.
The average inflation rate assumption for 2022 was adjusted upwards and is projected to range from 3.7 to 4.7 percent, following the uptick in the price of food and energy as a result of ongoing geopolitical tensions from the Russia-Ukraine conflict and disrupted supply chains.
Nevertheless, the DBCC maintained the inflation rate assumption at 2.0 to 4.0 percent for 2023 to 2025, consistent with the latest forecasts of other agencies and its deceleration over the medium term.
Meanwhile, the assumption for the price of Dubai crude oil per barrel for this year was increased to $90 to $110 per barrel considering potential supply disruptions caused by the Russia-Ukraine conflict.
Nonetheless, this is expected to decrease to $80 to $100 per barrel in 2023, and $70 to $90 per barrel in 2024 to 2025 as oil supply is expected to catch up over the medium term.
As economic activity is expected to continuously pick up over the medium-term, revenue projections were revised upward to P3.633 trillion (15.3 percent of GDP) for 2023 and to P4.063 trillion (15.6 percent of GDP) for 2024.
Revenue collections for 2025 are also expected to increase further to P4.549 trillion (16.1 percent of GDP).
Consistent with higher revenue projections, disbursements were also revised upwards to P5.086 trillion (21.3 percent of GDP) and P5.392 trillion (20.8 percent of GDP) for 2023 and 2024, respectively. Meanwhile, disbursements are projected to reach P5.723 trillion (20.2 percent of GDP) for 2025.
Given the revised revenue and disbursement program, the DBCC maintained its target deficit at 6.1 percent of GDP for 2023, 5.1 percent of GDP for 2024, and projected the figure of 4.1 percent of GDP for 2025, as the government continues to adopt a fiscal consolidation strategy to lower the deficit back to pre-COVID-19 levels.
Following higher revenue collections for next year, the proposed FY 2023 national budget is pegged at P5.268 trillion (22.1 percent of GDP).
“The DBCC remains strongly committed to exercise prudent macroeconomic and fiscal management in prioritizing expenditures that translate to the betterment of micro communities in the country,” it said.
“Our economic progress in the past two years demonstrates that the government’s risk management approach has been effective. With the full implementation of Executive Order No. 166 adopting the 10-point policy agenda, we will be able to accelerate and sustain economic recovery from the COVID-19 pandemic.”
“As we transition to a new administration, we are confident that the country will not see an end to the enactment of more game-changing reforms. The DBCC stands ready to work closely with the economic managers of the incoming administration to achieve more sustainable and inclusive growth for the Filipino people,” it said.