PhilStar 48, On the DBCC’s revised economic and fiscal targets

On the DBCC’s revised economic and fiscal targets

ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star 

July 3, 2025 | 12:00am

https://www.philstar.com/business/2025/07/03/2455005/dbccs-revised-economic-and-fiscal-targets

 

The Development Budget Coordination Committee (DBCC) issued revised macroeconomic and fiscal targets for 2025-2028 last week, June 26. The DBCC is chaired by Budget Secretary Amenah Pangandaman, with Finance Secretary Ralph Recto, Economic Planning Secretary Arsenio Balisacan, Executive Secretary Lucas Bersamin and Bangko Sentral Governor Eli Remolona as members.

 

I compare here the DBCC targets in June 26, 2025 vs. their targets in Dec. 2, 2024, respectively.

 

In GDP growth, 5.5 to 6.5 percent in 2025 then six to seven percent in 2026-2028, downwards from six to eight percent from 2025-2028 in previous targets.

 

In inflation, two to three percent in 2025 and two to four percent in 2026-2028, vs two to four percent in 2025-2028.

 

For the fiscal program: Revenues at P4.52 trillion in 2025 to P5.91 trillion in 2028, lower than previous targets of P4.64 trillion in 2025 to P6.25 trillion in 2018.

 

Expenditures at P6.08 trillion in 2025 to P7.47 trillion in 2028, lower than previous targets of P6.18 trillion in 2025 to P7.62 trillion in 2028.

 

Budget deficit at P1.56 trillion in 2025 or 5.5 percent of GDP to P1.55 trillion in 2028 or 4.3 percent of GDP. These are higher than previous targets of P1.54 trillion in 2025 or 5.7 percent of GDP to P1.37 trillion in 2028 or 3.7 percent of GDP

 

So the growth targets are seen to be lower while government spending and deficit are seen to be higher. Not a good revision but at least the adjustments are more realistic and more honest. The major factors for these changes are external – US tariff hikes announced last April, the Israel-Iran war in June and US involvement, the temporary spike in world oil prices, continued high US interest rates, and Russia-Ukraine war when they were expected to have mellowed.

 

For GDP growth in the first quarter (Q1) 2025, only 5.4 percent when expectation was 5.8 percent or higher as it was an election campaign period. Nonetheless growth is expected to be higher in Q2 2025 to reflect belated spending in April-May by politicians and households, among other factors.

 

Our inflation has mellowed to 1.4 percent in April and 1.3 percent in May, thanks to price monitoring and supply expansion measures by the economic team. But the oil price spikes in June during the Israel-Iran war have ticked prices to go up. Nonetheless, low inflation must have boosted consumer confidence and help pull up household spending which constitutes 74 percent of GDP. I see about six percent growth in Q2 2025.

 

For the fiscal situation, one indicator of non-rosy performance this year is data from the Bureau of Treasury for the period January-May: budget deficit jumped from P326 billion in 2023 to P405 billion in 2024 and P524 billion in 2025.

 

Same period January-May, expenditures rose from P1.92 trillion in 2023 to P2.26 trillion in 2024 and P2.48 trillion in 2025. Our interest payment alone for our public debt rose from P230 billion in 2023 to P322 billion in 2024 and P357 billion in 2025. Or an average of P2.4 billion a day interest payment alone this year, huge.

 

Revenues are slowing down: P1.59 trillion in 2023, P1.85 trillion in 2024 and P1.95 trillion in 2025. The BIR has a steady increase revenues but the BOC collection is flat at P381 billion in 2024 and 2025. Has smuggling and illicit trade got worse this year?

 

The economic team and DBCC members must work more on reining in public spending, cut subsidies that are supposed to be temporary and not permanent, national agencies should devolve more functions to LGUs which now have more share from the national tax, not duplicate in rising spending with LGUs.

 

On the non-tax revenues, one innovation made by Secretary Recto is he requested government-owned or -controlled corporations (GOCCs) to raise their mandatory remittance to the national government of their earnings the previous year from 50 percent (RA 7656, Dividend Law of 1993) to 75 percent.

 

Many GOCCs and government banks complied. So far the Land Bank of the Philippines (LBP) has the highest remittances to the national government, P32 billion in 2024 and P33 billion in 2025, hats off to my UPSE 1984 batchmate, LBP president Lynette Ortiz.

 

Recently, the Power Sector Assets and Liabilities Management Corp. (PSALM) made a dividend remittance of P8.96 billion to the National Treasury. This is a good development and rather surprising for me because I see that PSALM was getting P8 billion a year in subsidy in recent years, mainly because several electric cooperatives in Mindanao do not pay PSALM for the power supply they get from the hydro plants there.

 

The DBCC and the economic team should work on long-term privatization of many government assets like land and poorly-performing GOCCs. Privatization does not abolish those corporations, there is only transfer of ownership from government to private corporations and unburdening the taxpayers of continued subsidies.

 

All proceeds from privatization should be used to retire some public debt, reduce the debt stock to reduce our annual debt servicing, both principal amortization and interest payment. No earmarking of privatization proceeds to any government agency or program no matter how bleeding heart the arguments are. Proceeds should go to reduce the public debt.