By Beatrice M. Laforga, Reporter

THE Development Budget Coordination Committee (DBCC) slashed the projected national budget for the next two years, as revenues are expected to take a huge hit from the coronavirus crisis.

According to the latest medium-term fiscal program published late Thursday, the DBCC projected the 2021 budget at P4.2 trillion, equivalent to 19.7% of gross domestic product (GDP), and 8.4% smaller compared to the P4.586 trillion budget proposed during its meeting last December.

For 2022, the DBCC set a P4.451-trillion budget, 13% lower than the P5.12 trillion projected in December.

Budget Secretary Wendel E. Avisado said in a phone message that the smaller budget plan is due to lower projected revenues.

Based on the medium-term fiscal program adopted by the DBCC during a special meeting on May 12, the state revenue projections stood P2.929 trillion for 2021, down 24% from the previously estimated P3.849 trillion.

In 2022, the government expects to collect P3.27 trillion in revenues, 24% lower from the earlier projected revenue of P4.31 trillion.

Finance Secretary Carlos G. Dominguez III said the revenue program were lowered because other macroeconomic assumptions such as gross domestic product, imports, and oil prices were also seen to decline this year due to the coronavirus crisis.

“GDP growth forecast is negative for 2020. All these conspire to lower the taxbase of revenues,” Mr. Domiguez told reporters Friday via Viber message.

“The medium term outlook is more positive than for 2020 though. Overall fiscal program for 2021-2022 follows a realistic trajectory of recovery that allows for growth while maintaining fiscal discipline,” he added.

Despite lower budget plan, DBCC has projected 7.1-8.1% growth in 2021 and 7-8% growth in 2022, which NEDA Acting Secretary Karl Kendrick T. Chua attributed to “across the board” recovery.

“Across the board recovery in consumption, investment and trade,” Mr. Chua said in a text message when asked for the expected growth drivers in the next two years.

Some economists said the spike in GDP growth next year will likely be due to base effects as the country picks up from the projected 2-3.4% contraction this year.

GlobalSource country analyst for the Philippines Romeo L. Bernardo said he expects a worse GDP output this year with a sharp 5-7% decline, downgraded from the 0.5% contraction outlook given last month.

In an online forum on Friday, Mr. Bernardo said the economy is more likely to see a long U-shaped recovery or W-shaped one, rather than the V-shaped recovery path that Mr. Chua earlier said is achievable if policies are used proactively.

With lower revenues, the inter-agency DBCC projected the budget deficit to spike to 8.1% of GDP this year before a gradual decline to 6% next year and 5% in 2022.

First quarter GDP posted a 0.2% contraction. Mr. Chua said “worse” figures should be expected this quarter as the lockdown period made up two-thirds of the quarter, signalling a start of a recession for the Philippines.

Other organizations and think tanks have slashed their growth forecasts for the Philippines this year. Capital Economics projected a six percent full-year contraction after the lockdown in Metro Manila and two other cities was extended until end of the month.

Also recently, Moody’s Investors Service and Fitch Solutions both downgraded their 2020 GDP forecast for the country to a two-percent contraction from the previous projections of 2.5% and -0.5%, respectively.

Meanwhile, World Bank is set to downgrade the three-percent growth projection it gave in April, while the Asian Development Bank’s latest estimate was two percent growth.