March 13, 2019

We, the members of the Development Budget Coordination Committee (DBCC), held a meeting to revisit the macroeconomic assumptions and medium-term fiscal and growth targets of the government. This is in light of recent developments, both domestic and external, as well as in preparation for the proposed 2020 National Expenditure Program (NEP). The macro-economic assumptions are as follows:

The inflation rate assumption will remain at 3.0 – 4.0% in 2019 and at 2.0 – 4.0% from 2020 to 2022. This is consistent with the government’s estimate that inflation will return to the target level this year.

In addition, the assumption for the USD price of Dubai crude oil per barrel has been adjusted downwards in the medium-term. From 2019 to 2022, the price range is now projected to average between USD 60-75 per barrel.

Meanwhile, the PhP-USD exchange rate assumption is retained at PhP 52 to 55 against the USD from 2019 to 2022.

Furthermore, the assumptions for the 364-day Treasury bill rate and the 6-month London Inter-bank Offered Rate (LIBOR) have been adjusted. The average T-bill rate will range from 5.5 – 6.5% in 2019 and 5.0 – 6.0% in 2020 until 2022. On the other hand, the 6-month LIBOR will range from 2.5 – 3.5% from 2019 up to 2022.

Assumptions in goods exports growth were maintained at 6.0% from 2019 to 2022. The goods imports growth projections were also retained at 9.0% in 2019 and 8.0% from 2020 to 2022.

We also maintained services exports growth at 11.0% from 2020 to 2022, although adjusted downwards to 10% in 2019. Lastly, services imports growth have been retained at 5.0% in 2019, 6.0% in 2020, and 7.0% in 2021 and 2022.

Medium-Term Fiscal Program

Revenue collections are projected to reach PhP 3.15 trillion in 2019, equivalent to 16.2% of Gross Domestic Product (GDP), the highest in recent years. Revenue measures from the Tax Reform Program are projected to contribute PhP 162.2 billion to the government’s coffers in 2019, taking into account the Tax Reform for Acceleration and Inclusion (TRAIN) Law and the approved package 1B less e-receipts.

Meanwhile, disbursements are targeted to reach PhP 3.78 trillion in 2019, assuming the national budget is reenacted for the first quarter of the year. The disbursement target is equivalent to 19.4% of GDP.

Given the approved revenue and disbursement programs, the corresponding nominal deficit target is set at PhP 631.5 billion in 2019, equivalent to 3.2% of GDP.

The deficit target will then be maintained at 3.0% of GDP from 2020 to 2022, striking a good balance between fiscal discipline and higher investments for urgent programs and projects.

Taking into account the aforementioned factors, the Gross Domestic Product (GDP) growth target range has been adjusted to 6.0 – 7.0% in 2019, 6.5 -7.5% in 2020, and 7.0-8.0% from 2021 to 2022.

The impact on economic growth of budget reenactment is estimated at -0.7 to -0.9 percentage points (ppts) if the budget is reenacted until April 2019, -1.4 to -1.9 ppt if until August 2019, and -2.1 to -2.8 ppt under a full-year reenacted budget.

We therefore urge Congress to transmit the 2019 National Budget at the soonest possible time to Malacañang so the government can sustain its investments on development priorities, namely public infrastructure and social services. The longer the budget impasse lasts, the larger the adverse effect to the Philippine economy and its people.

Despite looming headwinds, we remain confident of the sound macroeconomic fundamentals and resilience of the Philippine economy. We assure the Filipino people that the economic managers will continue to monitor developments, at home and overseas, to secure the sustained growth and development of the country.