The BGA Philippines Team, led by Managing Director Victor Andres Manhit, wrote an update to clients on the government’s budget deliberations.

Context

  • The Philippine House of Representatives commenced its briefings for the proposed fiscal year 2024 budget. On the first day of a series of briefings, the Development Budget Coordination Committee, which includes the country’s economic managers, provided an overview of the budget and its priority expenditures; developments in the monetary, financial and external sectors; the Philippines’ economic performance; fiscal and revenue collection; budget financing; and legislative priorities.
  • The government is expected to accelerate its programs to reach its ambitious growth targets by 2028. Economic growth slowed to 4.3 percent in the second quarter amid rising commodity prices, interest rate hikes and reduced consumer and government expenditures. The budget’s identification of priority expenditures could provide businesses with more opportunities for investment and expansion.

Significance

  • Department of Budget and Management Secretary Amenah Pangandaman said the proposed budget is set at PHP 5.8 trillion ($102.5 billion), equivalent to 21.7 percent of the gross domestic product (GDP) and 9.5 percent larger than this year’s budget. The 2024 budget will prioritize expenditures based on the administration’s Eight-Point Socioeconomic Agenda and the Philippine Development Plan (PDP) 2023-2028. Government disbursements will be sustained at about 20 percent of GDP.
  • Finance Department Secretary Benjamin Diokno emphasized the need for sound fiscal management, which would provide adequate fiscal space for priority government programs, projects and plans to achieve the administration’s Eight-Point Socioeconomic Agenda by 2028. The economic team has set the Medium-Term Fiscal Framework targets: lower the debt-to-GDP ratio to less than 60 percent by 2025, reduce the deficit-to-GDP ratio to 3 percent by 2028 and maintain annual infrastructure investment at 5-6 percent of GDP.

Implications

  • The Finance Department aims to enact seven critical tax measures within the 19th Congress, which will raise revenue to PHP 120.5 billion ($2.1 billion) in 2024 and PHP 183.2 billion ($3.2 billion) in 2026. Diokno said a luxury tax is not part of the department’s proposal.
  • The Finance Department is committed to work with Congress on key reforms crucial to accelerating economic development. These include the remaining tax reform packages of the Duterte administration. Additional measures include the excise tax on single-use plastics, rationalization of the mining fiscal regime, the motor vehicle road users’ tax, excise taxes on sweetened beverages and junk food, tax on pre-mixed alcohol, value-added tax on digital service providers, carbon taxation, Capital Market Development Bill and the bill on military and uniformed personnel pension reform.

We will continue to keep you updated on developments in the Philippines as they occur. If you have any questions or comments, please contact BGA Philippines Managing Director Victor Andres Manhit at vmanhit@bowergroupasia.com.

Best regards,

BGA Philippines Team

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Managing Director

Dindo is recognized as one of Manila’s most well-connected and savvy advisors on developments in government and business in the Philippines. Concurrent to his role as managing director for BGA’s operations in the Philippines, he is also the founder and managing director of the Stratbase Group and president of its policy think tank, the Albert del Rosario Institute for Strategic and International Studies. Since 1991, Dindo has served as a member of the faculty and is the former chair of the Political Science Department and a senior fellow of the La Salle Institute of Governance at the De La Salle ... Read More