The government’s Development Budget Coordination Committee (DBCC) has reviewed and recalibrated some of its medium-term macroeconomic assumptions and fiscal programs to take into account emerging domestic and global developments.
The DBCC sees inflation settling between three and four percent by the end of the year, which was revised from the previous assumption of two to four percent for 2024.
In a press conference at the Department of Finance (DOF) office in Manila after the DBCC meeting yesterday, Budget Secretary Amenah Pangandaman said the latest assumption is still significantly lower than the average inflation in other emerging markets and developing economies at 8.3 percent and the global average of 5.9 percent, as projected by the International Monetary Fund.
“We are determined to achieve price stability and return to the target range of two to four percent from 2025 to 2028 through the proactive implementation of monetary policy measures and well-targeted government interventions that address the primary drivers of inflation,” Pangandaman said.
“This includes implementing the new Comprehensive Tariff Program for 2024-2028 to improve the affordability of essential commodities amid the rising global prices and the Food Stamp Program to mitigate the impact of elevated food prices on the poor and vulnerable sector,” she added
Dubai crude oil price assumptions were slightly narrowed to $70 to $85 per barrel from $70 to $90 per barrel in 2024 as global oil prices are expected to stabilize for the rest of the year.
The assumption of $65 to $85 per barrel from 2025 to 2028 was maintained as global oil production is expected to rebound over the medium term, consistent with the backwardation observed in oil futures markets, the budget chief said.
The peso-dollar exchange rate assumption for 2024 was revised to P56 to P58 against the US dollar, from the previous estimate of P55 to P57.
“This is expected to broadly stabilize at P55 to P58 against the US dollar for the remainder of the medium term, given increasing tourism receipts, growing BPO revenues and robust overseas Filipinos remittances that will support and keep the currency stable and resilient against persisting global headwinds,” Pangandaman said.
The growth assumption in 2024 for goods exports was revised upwards to five percent from three percent given the better-than-expected outturn in the first quarter and an improved outlook for the global semiconductor market, Pangandaman said.
This will continue to grow to six percent in 2025 to 2028.
Growth projection for goods imports was revised downwards to two percent in 2024 and five percent in 2025 amid moderation in international commodity prices alongside the impact of tight monetary policy tempering consumption and investment activity.
For gross domestic product growth assumptions, the DBCC kept its previous estimates of six to seven percent for 2024, 6.5 to 7.5 percent for 2025 and 6.5 to eight percent for 2026 to 2028.
“We are committed to implementing growth-enhancing strategies to mitigate these risks such as sustaining government efforts to address inflation, promoting and adopting digitalization to improve efficiency in government spending, accelerating infrastructure development, expanding skills development for our workforce and strengthening inter-industry supply chain linkages, among others,” Pangandaman said.
“This growth trajectory puts us firmly on the path to becoming an upper-middle-income economy in less than two years and reducing the poverty rate to single-digit levels by 2028,” she added.
National Economic and Development Authority secretary Arsenio Balisacan said initially, based on last year’s numbers, the expectation was the country will become an upper-middle-income economy by 2025.
“…we have revised downward a bit the growth… it’s (still) possible to reach it but perhaps toward the latter part of 2025. (It also) depends on how far our exchange rate will go next year and in 2026,” Balisacan said.
Meanwhile, the DBCC recalibrated its fiscal targets to make it “more realistic, practical and adaptive to external and domestic developments.”
While the DBCC kept its fiscal estimates for this year, revisions were recorded for revenue and disbursement projections for 2025 to 2028.
“The DOF has recalibrated its priority revenue reforms in consideration of the present economic situation to ensure that the proposals do not result in unintended consequences that may affect inflation and growth,” Pangandaman said.
DOF undersecretary Domini Velasquez said the expected higher revenues in the coming years will be supported by several factors.
“We are currently doing a lot of tax efficiency improvements in both the Bureau of Customs and Internal Revenue. Additionally, we do have tax reform measures although we don’t have any new tax measures that are inflationary, and this should add to around P42 billion on average annually,” Velasquez said.
Pangandaman said based on the revenue and spending outlook, the DBCC recalibrated the deficit program to more effectively address the country’s pressing and urgent needs.
“The new deficit path will decline more realistically and sustainably, from 5.6 percent of GDP in 2024 to 3.7 percent of GDP in 2028, allowing sufficient fiscal space for the government to invest in infrastructure development and other growth-enhancing programs and projects,” Pangandaman said.
“The debt-to-GDP ratio will also decline from 60.6 percent in 2024 before settling at 56 percent in 2028, well within the internationally accepted threshold of 70 percent, as recommended by the International Monetary Fund,” she added.
Meanwhile, Pangandaman said the proposed 2025 budget is P6.352 trillion, which will be 10.1 percent higher than this year’s level of P5.768 trillion.
