The Development Budget Coordination Committee updated the medium-term fiscal program, with the budget deficit expected to reach a record P774.3 billion by 2022 on the back of higher expenditures.
“We have reviewed the government’s macroeconomic assumptions and updated the medium-term fiscal program to ensure that the 2019 budget reflects prevailing economic conditions,” said Budget Secretary Benjamin Diokno, who is also the chairman of DBCC.
Diokno was joined by fellow economic managers Finance Secretary Carlos Dominguez and Economic Planning Secretary Ernesto Pernia, as the DBCC held its 173rd meeting Monday.
“I can assure you that our fiscal strategy remains to be prudent, sustainable and supportive of our development objectives,” Diokno said.
Revenue collection is now expected to reach P3.208 trillion in 2019, equivalent to 16.6 percent of gross domestic product. This is projected to rise to P4.588 trillion by 2022, or 17.7 percent of GDP.
Meanwhile, government disbursements are programmed to hit P3.833 trillion in 2019, or 19.8 percent of GDP, rising to P5.362 trillion by 2022, or 20.7 percent of GDP.
“Government spending will continue to be a growth driver for the Philippine economy, especially as we invest on public infrastructure and human capital development,” said Diokno.
“We are optimistic that we will virtually eradicate underspending in fiscal year 2019, as we transition to cash-based budgeting,” Diokno said.
The planned budget deficit is set at P624.0 billion for 2019, rising to P774.3 billion by 2022. As share of GDP, this is equivalent to 3.2 percent in 2019, up from the previous target of 3 percent.
“We have slightly adjusted the deficit forecast in order to maintain the aggressive spending strategy that will sustain the momentum of the ‘Build, Build, Build’ program,” said Finance Secretary Carlos Dominguez.
He said the economic managers slightly adjusted the deficit forecast from 3 percent to 3.2 percent through 2019. “We assure our people that the government remains committed to fiscal discipline even as it pursues a high level of productive spending that will clear the way to high―and inclusive―growth,” Dominguez said.
Data showed that in the first five months of 2018, revenue collection reached P1.19 trillion, up 19 percent from a year ago and 7.4 percent above the target.
“For these, we credit the administrative reforms undertaken by both agencies [BIR and Customs] as well as the beneficial effects of the Train [Tax Reform for Acceleration and Inclusion] law passed late last year,” Dominguez said.
Dominguez said that to ensure efficient borrowing, this year’s goal of sourcing 65 percent of loans from the domestic market and 35 percent from external sources would be modified so that the government would now be targeting the proportion of domestic borrowing to increase to
75 percent, which would reduce the percentage of external financing in the mix to 25 percent.
“The larger proportion of domestic borrowing in the 2019 mix will help us better hedge against foreign exchange risks,” Dominguez said.
Diokno said the medium-term financing program would continue to favor domestic borrowings, following a 65-35 mix in 2018, and a 75-25 mix from 2019 to 2022.
Despite the wider budget deficit, the debt-to-GDP ratio is projected to decline from 42.2 percent of GDP in 2018 to 38.8 percent in 2022.
The DBCC also affirmed its economic growth target in the medium-term at 7 percent to 8 percent.
“We remain optimistic and maintain our economic growth target for the medium-term at 7 percent to 8 percent on the back of higher household consumption from job expansion, as well as increased infrastructure spending from the ‘Build, Build, Build’ program, and brighter prospects for the tourism sector,” Pernia said.
“Moreover, we also expect higher public and private investments through a reduction in the cost of doing business and reduced foreign investment restrictions,” he said.
The 2019 National Expenditure Program will be submitted to Congress on July 23, the day President Rodrigo Duterte will deliver his 3rd State of the Nation Address.