DBCC keeps economic growth targets as revenues increase

The inter-agency Development Budget Coordination Committee (DBCC) maintained its economic growth targets for the next five years as the government expects more revenues from its tax reform programs. Following its meeting yesterday, the DBCC kept its gross domestic product (GDP) targets at 7.0 percent to 8.0 percent from this year until 2022, which will be supported by higher revenues from a series of tax reform initiatives.

Socioeconomic Planning Secretary Ernesto Pernia explained yesterday that the economic team decided to maintain its growth targets to “make us work harder in reaching our medium term goals.”

“Regarding the possible shortfall in tourist arrivals due to the Boracay closure, DOT [Department of Tourism] will have to step up its efforts at advertising and marketing our several other tourist destinations,” Pernia said.

Meanwhile, the economic managers raised their revenue projections this year due to the implementation of first tax reform law.

The medium-term revenue program was revised upwards by the DBCC after it considered the impact of the Tax Reform for Acceleration and Inclusion act (TRAIN) 1-A and the expected passage of 1-B.

Revenue program this year was raised by R57.3 billion to R2.846 trillion.

“Package 1A and 1B of the tax reform program will contribute R124.9 billion in FY 2018 rising to R215.8 billion in 2022,” the DBCC said.

In total, government revenues are projected to increase from 16.3 percent GDP in 2018 to as much as 17.5 percent in 2022, or a nominal amount of R4.485 trillion.

“The projected increase in the government’s revenue take arising from the implementation of the TRAIN law and the succeeding packages of the comprehensive tax reform program (CTRP) strengthens the goal fiscal position of the Duterte administration,” the DBCC said.

Finance Secretary Carlos G. Dominguez III said that the additional revenues from the tax reform program will allow the government to pursue “an aggressive” investment policy anchored on higher spending on infrastructure and human capital over the medium term.

Along with higher revenues, the DBCC raised its disbursement program from R3.313 trillion to R3.37 trillion this year, equivalent to 19.3 percent this year.

By 2022, the DBCC expects disbursement-to-GDP ratio will further rise to 20.5 percent.

“The improved fiscal program of the government, particularly the Build, Build, Build initiative, is expected to boost economic expansion from 2018 to 2022,” Budget Secretary Benjamin E. Diokno said.

“We are on track to hit our fiscal targets especially with our shift to cash-based budgeting starting FY 2019,” he added.

In the medium term, the government’s budget deficit cap was also maintained at 3.0 percent of the economy, equivalent to R523.7 billion in nominal terms this year and at R774.3 billion by 2022.

On the other hand, the DBCC revised its financing program for this year to 65:35 in favor of the domestic market from the previous 74:26 mix.