Financing the 2014 Expenditure Program

Macroeconomic Assumptions

The Philippine economy has remained resilient over the past three years, and has even outperformed its neighbors in recent times. In the first quarter of 2013, the economy grew the fastest in Asia at a rate of 7.8 percent: this means that the target of 6-7 percent GDP growth for this year will likely be met. For 2014, the Aquino Administration expects faster growth of 6.5 to 7.5 percent. Meanwhile, the inflation, interest, and foreign exchange rates should remain benign given the country’s stable fiscal position.Macro


The figures for 2010 to 2012 represent actual performance; for 2013, based on the approved General Appropriations Act; for 2014, based on proposed Budget.


Real GDP Growth refers to the growth of the domestic economy as adjusted for inflation. It can affect government revenues, as higher GDP generally results in a larger tax base and higher revenue collections domestically.

Inflation Rate is the increase in the price of goods and services. It affects revenues: higher inflation means higher prices of taxable products. The inflation rate is also a benchmark for possible increases in agencies’ expenditures due to higher cost requirements.

364-Day T-bill Rate refers to the benchmark interest rate on Treasury Bills (T-bills) issued by the national government to generate funds. An increase in the rate will raise government revenues due to taxes on interest income; however, it also increases the government debt burden due to additional requirements for interest payments.

Foreign Exchange (ForEx) Rate refers to the rate at which the Philippine Peso is exchanged for another currency, more commonly with the US Dollar. Any change in the ForEx rate correspondingly changes the Peso cost of expenditures paid in US Dollars, most notably foreign debt repayments and interest payments.

Imports Growth refers to the growth in the value of goods and services entering the country. Imports growth is a key input to the estimation of revenues: an increase in imports could thus lead to an increase in customs duties, taxes and other revenues collected.


Fiscal Program

From this year to 2016, the government seeks to sustain a manageable deficit level equivalent to 2 percent of GDP. To achieve this in 2014, the government seeks to increase its revenues by 15.6 percent to P2.0 trillion. This will also allow public disbursements to grow by 15.5 percent to 2.28 trillion in 2014.