Review of the Macroeconomic Assumptions and Fiscal Program for the 2021 President’s Budget
December 11, 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 2021 National Expenditure Program (NEP).

Macroeconomic Assumptions

The average inflation rate for 2019 is projected to settle at 2.4 percent, indicating relatively stable prices for Filipino consumers, while the assumed average rates for 2020 to 2022 will remain between 2.0 to 4.0 percent throughout.

In addition, the assumption for the USD price of Dubai crude oil per barrel has been adjusted downwards in the medium-term. For 2019, the projected range has been narrowed to the range of USD63.00 to USD64.00 per barrel. From 2020 to 2022, the price range is now projected to average between USD55.00 to USD70.00 per barrel.

Furthermore, the PhP-USD exchange rate assumption is revised downward to the range of PhP51.00 to PhP52.00 against the USD in 2019 and from PhP51.00 to PhP54.00 against the USD from 2020 to 2022.

Likewise, the assumptions for the 364-day Treasury bill rate and the 6-month London Interbank Offered Rate (LIBOR) have been adjusted downward. The average T-bill rate will range from 5.1 to 5.3 percent in 2019 and 3.5 to 4.5 percent in 2020 until 2022. On the other hand, the 6-month LIBOR will range from 2.3 to 2.4 percent in 2019, and from 1.5 to 2.5 percent from 2020 to 2022.

The assumption for goods export growth is revised downward in the short term to 1.0 percent for 2019 and 4.0 percent in 2020 due to continuing unresolved trade tensions. However, the assumptions for 2021 and 2022 are retained at 6.0 percent as global economic activity is expected to recover in the medium-term.

Assumptions in services exports growth were maintained at 9.0 percent from 2019 to 2022. The services imports growth projection for 2019 was adjusted downward to 2.0 percent in 2019, and fixed at 4.0 percent in 2020 and 5.0 percent in 2021 and 2022.

Medium-Term Fiscal Program

Revenue collections are projected to reach PhP3.15 trillion in 2019, equivalent to 16.8 percent of Gross Domestic Product (GDP). Meanwhile, disbursements are targeted to hit PhP3.76 trillion in 2019, which is equivalent to 20.0 percent of GDP.

For 2020, revenues are projected to increase to PhP3.49 trillion, equivalent to 16.6 percent of GDP, while disbursements are programmed at PhP4.16 trillion or 19.8 percent of GDP. Revenue and disbursement projections are estimated to rise to PhP4.31 trillion (17.0 percent of GDP) and PhP5.12 trillion (20.2 percent of GDP), respectively, by 2022.

The comprehensive tax reform program can help ensure a reliable revenue base and, more importantly, enhance the modernization of our economy. Quickly completing the passage of the remaining tranches of the tax reform will ensure a steady revenue flow and equitable sharing for the government’s social and infrastructure programs while securing fiscal stability long into the future. The speedy passage of the Corporate Income Tax and Incentives Rationalization Act (CITIRA) will help attract additional investment into the country and the alcohol and e-cigarette excise tax adjustments will substantially bridge the funding gap for the Universal Health Care program.

Given the revenue and disbursement program adopted by the DBCC, the deficit target will be maintained at 3.2 percent of GDP from 2019 to 2022 to sustain the government’s investments in infrastructure and human capital development.

Accounting for the aforementioned factors, the GDP growth target is projected at 6.0  to 6.5 percent in 2019 and 6.5 to 7.5 percent in 2020 to 2022.

FY 2021 National Expenditure Program

Consistent with the macroeconomic assumptions and foregoing fiscal targets, the FY 2021 cash budget is pegged at PhP4.640 trillion. The proposed PhP4.640 trillion cash budget for FY 2021 is higher by PhP540 billion or 13.3 percent than the PhP4.100 trillion cash budget for FY 2020 and is equivalent to 20.2 percent of GDP.

The proposed 2021 National Budget will continue to support anti-poverty and peace-sustaining measures through funding of recently-approved legislative measures. In line with this, there will be continued funding for the following priority social protection and economic programs:

  • Universal Health Care Program

  • Pantawid Pamilyang Pilipino Program

  • Rice Tariffication Law

  • provision for the Annual Block Grant, Special Development Fund, and Share in National Taxes of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM)

  • Universal Access to Quality Tertiary Education

  • Refocusing of National Government assistance to LGUs with high poverty incidence

  • Climate change mitigation and adaptation measures

The DBCC also approved the creation of the Subcommittee on Sustainable Development Goals (SDG) to review and recommend to the DBCC SDG-related policies and programs.

We are committed to building a more effective and competitive economy, one that will provide good jobs to our workers, improve the living conditions of the poor, and create more opportunities for all Filipinos.