Sustainable growth intact with medium-term fiscal program: DBCC

July 2, 2018

The country's fiscal strategy remains "prudent, sustainable, and supportive of development objectives," said the Development Budget Coordination Committee (DBCC), chaired by Budget and Management Secretary Benjamin Diokno on Monday.

The inter-agency committee deliberated on the government’s fiscal program in time for the submission of the 2019 national budget to Congress next month.

“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 Diokno. “I can assure you that our fiscal strategy remains to be prudent, sustainable, and supportive of our development objectives,” he added.

Revenue collection is expected to reach P3.208 trillion in 2019, equivalent to 16.6 percent of gross domestic product (GDP). This is projected to rise to P4.588 trillion in 2022, or 17.7 percent of GDP. Tax policy reforms and improved tax administration will provide a much-needed boost to revenue effort in the medium-term.

Disbursements are programmed to hit P3.833 trillion in 2019, equivalent to 19.8% of GDP, rising to P5.362 trillion in 2022, or 20.7 percent of GDP. The shift to cash-based budgeting is projected to enhance the efficiency of national government disbursements.

“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,” he added.

The planned deficit is set at P624 billion for 2019 up to P774.3 billion in 2022. As share of GDP, this is equivalent to 3.2% in 2019. The medium-term financing program will continue to favor domestic borrowings, following a 65-35 mix in 2018, and a 75-25 mix from 2019 to 2022.

As a testament to the sustainability of the government’s fiscal program, the debt-to-GDP ratio is also projected to decline from 42.2 percent in 2018 to 38.8 percent in 2022.

“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. “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.”

The government affirmed its growth target in the medium-term at 7 - 8 percent.

“We remain optimistic and maintain our economic growth target for the medium-term at 7.0 percent to 8.0 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,” Socioeconomic Planning Secretary Ernesto 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 added.

The 2019 National Expenditure Program will be submitted to Congress on July 23 when President Rodrigo Duterte delivers his 3rd State of the Nation Address (SONA). DMS