The Department of Budget and Management submitted the proposed P4.5-trillion 2021 national budget to Congress. The proposed National Expenditure Program (NEP), is 9.9 percent higher than the 2020 budget, and 21.8 percent of the country’s gross domestic product (GDP). The Department of Agriculture allocation fell by 6% to P66.4 billion while that of Social Welfare and Development Department budget has been slashed by 53% to P171.2 billion next year. A total of P113.8 billion or 66% of the total budget of the Department of Social Welfare and Development for next year has been appropriated for the implementation of the Pantawid Pamilyang Pilipino Program (4Ps).
The budget share for the Public Works and Transportation departments were increased significantly. The Department of Public Works and Highways (DPWH) gained the most by P227 billion to P667.3 billion, which is 55% higher than this year’s P438.9-billion budget. About a quarter of the DPWH’s funds would fund road projects. It is followed by the Department of Transportation with a proposed allocation of P143.6 billion. Its proposed budget went up by P61.2 billion from this year’s P84.2 billion, as it is set to fund P106.3 billion worth of rail projects.
The education cluster, consisting of the Department of Education, state universities and colleges, Commission on Higher Education, and Technical Education and Skills Development Authority, has the biggest share at P754.4 billion, which is 16% or P104.2 billion higher than this year’s P650.2-billion adjusted budget. Education is constitutionally mandated to get the lion’s share of the national budget.
The Department of Interior and Local Government will get a P246.1-billion budget, up by 4%, while the Department of National Defense’s budget jumped 16% to P209.1 billion.
The allocation for the Health department rose only by 14% to P203.1 billion despite the ongoing pandemic. The rise is due to expected hiring of more DoH personnel and procurement of a possible vaccine for CoViD-19.
The proposed national budget is expected to revive a coronavirus-hit economy expected to suffer a 2% to 3.4% decline in gross domestic product this year for the first time in two decades. Despite the gloomy economic outlook this year, the government is anticipating a 7-8% GDP growth in the next two years and the inflation at the manageable level of 2-4%.
Personnel services account for 29.2 percent or P1.32 trillion of the proposed expenditure due to hiring of additional personnel, the second tranche implementation of the Salary Standardization Law of 2019, and the increased pension requirements of military and uniformed personnel. Duterte also signed the law that increased the monthly old-age pension of living war veterans from P5,000 to P20,000.
A total of P920.5 billion or 20.4 percent of the proposed budget will be spent on capital outlays. Maintenance, Operating, and Other Expenditures at P699.4 billion. P560.2 billion for debt payment. P157.5 billion for Government Owned and Controlled Corporations support. Another P14.5 billion was set aside for tax expenditures.
According to the Department of Finance (DOF), the latest estimates suggest that over half or 56.89 percent of the expenditures will be financed by tax collections. P175.4 billion of the 2021 budget will be financed by non-tax revenues, while P500 million will be from privatization efforts and grants.
The remaining 39.16 percent or P1.746 trillion, will be financed through loans. The latest data available from the Bureau of the Treasury (BTr) indicates that the government’s debt has so far ballooned to P9.054 trillion as of end-June 2020. The 2021 deficit is estimated at P1,749.6 billion (8.6 percent of GDP).
The National Economic and Development Authority (NEDA) projected the ratio of the philippine debt to economic growth to likely hit 47 percent this year, given the increased borrowing to finance efforts against the CoViD-19. Bangko Sentral ng Pilipinas (BSP) said a 50 percent debt-to-GDP ratio could still be “acceptable,” given the “manageable” position of the country.
The 2021 budget is technically the election-year budget since some infrastructure and other projects will be banned once the campaign starts in 2022. We anticipate Congress to fast track the enactment of next year’s budget to ensure that projects are finished next year and that they could brag about it come election season.