THE government is aiming for a growth rebound beginning next year under downwardly revised targets adopted amid continued global and domestic uncertainties.
“The current macroeconomic conditions and geopolitical developments have increasingly undermined the credibility and relevance of the growth targets and fiscal projections,” Acting Budget Secretary Kim Robert de Leon said in a national budget memorandum issued on Friday.
The interagency Development Budget Coordination Committee (DBCC), which Socioeconomic Planning Secretary Arsenio Balisacan last week said had cut this year’s gross domestic product (GDP) growth goal to 3.5-4.5 percent from 5.0-6.0 percent, expects the country to record a faster 5.0- to 6.0-percent expansion for 2027 to 2030.
Like the new 2026 target, the updated goal for the next three years is lower than the 5.5-6.5 percent for 2027 and 6.0-7.0 percent for 2028 that the DBCC set in December. Those figures had also been slashed from 6.0-8.0 percent in the wake of a massive flood control project scandal.
“The issues surrounding alleged anomalies in flood control projects last year and, more recently, the conflict involving the United States, Israel and Iran made a drastic impact on the country’s macroeconomic fundamentals,” de Leon said.
“These further constrained the NG’s (national government’s) ability to meet its revenue targets, sustain economic growth, address key development gaps, and consolidate gains from past structural reforms and poverty reduction efforts,” he added.
Economic activity is expected to recover beginning next year as several growth-supporting measures gain traction, including the Unified Package for Livelihoods, Industry, Food and Transport (Uplift) program that was announced earlier this year in response to the energy shock caused by the war in the Middle East.
The accelerated implementation of high-impact infrastructure projects and the Luzon Economic Corridor were also tagged as drivers of the 2027 rebound.
Still, the DBCC acknowledged that downside risks remained significant. It cited the possibility of a prolonged Middle East war, weak consumer and business confidence and the intensification of a looming El Niño.
The inflation environment is also expected to be more challenging, with consumer price growth now forecast to hit 6.0-7.0 percent this year — well above the 2.0- to 4.0-percent target — due to elevated global commodity prices and supply disruptions linked to the US-Iran war.
The rate is projected to ease to 4.0-5.0 percent in 2027 before returning to the target range from 2028 onward.
Other macroeconomic assumptions have been revised to reflect the more difficult global environment.
The peso is now expected to average P60-62 per dollar over the medium term as depreciation pressures persist amid external uncertainties.
Dubai crude oil prices were projected to average $80-100 per barrel in 2026 before easing to $70-90 in 2027 and $60-80 from 2028 to 2030.
Tighter budget scrutiny
Government agencies seeking additional funding for next year, meanwhile, face stricter scrutiny amid limited fiscal space and mounting mandatory expenditures while preparing the proposed 2027 national budget.
The proposed national budget for 2027 is P7.2 trillion, equivalent to 21.7 percent of GDP and a six-percent increase from this year's P6.79-trillion spending program.
“In crafting the proposed FY 2027 budget, the government is confronted with a very narrow fiscal space,” de Leon said.
“Hence, with the overarching goal of providing more funds for productive and key development expenditures, a careful review of agency budget proposals, including increased scrutiny of Tier 1 budget levels, was undertaken,” he added.
The budget memorandum also stressed that agency absorptive capacity and implementation readiness would remain major considerations in determining funding levels for new and expanded programs, activities and projects (PAPs).
De Leon said that every peso included in the budget should translate into "meaningful and tangible accomplishments," stressing the need for agencies to demonstrate their ability to efficiently implement proposed projects.
Only proposed PAPs that have completed the required review and approval processes by oversight agencies or committees within the prescribed timelines will be considered for funding under the proposed 2027 budget.
Under the revised fiscal framework, revenues are projected to increase to P5.21 trillion in 2027 from an estimated P4.81 trillion this year. Revenue collections are projected to reach P5.52 trillion in 2028, P5.99 trillion in 2029 and P6.52 trillion in 2030.
Disbursements were programmed to rise to P6.90 trillion from P6.47 trillion this year and are expected to climb to P7.25 trillion, P7.61 trillion and P7.98 trillion in 2028, 2029 and 2030, respectively.
The fiscal deficit is expected to widen to P1.69 trillion in 2027 from P1.66 trillion in 2026 but is projected to narrow as a share of the economy to 5.1 percent of GDP from 5.4 percent.
