BBM to fulfill needs, aspirations of Filipinos
By President Ferdinand Romualdez Marcos Jr.
(Message on the Proposed National Budget for Fiscal Year 2025, July 29, 2024)
Honorable Speaker of the House of Representatives; Honorable President of the Senate; Honorable Members of the 19th Congress:
In compliance with Section 22, Article VII of the Constitution, I hereby submit, through the President of the Senate and the Speaker of the House of Representatives, the National Expenditure Program (NEP) for Fiscal Year 2025.
The proposed National Budget, or the NEP for FY 2025, is P6.352 trillion. This is equivalent to 22.1% of Gross Domestic Product (GDP) and 10.1% higher than the FY 2024 General Appropriations Act (GAA), which amounted to P5.768 trillion.
Aligned with the Philippine Development Plan (PDP) 2023-2028 and designed to continue our objective of ushering in economic and social transformation, it is anchored on the theme “Agenda for Prosperity: Fulfilling the Needs and Aspirations of the Filipino People”.
The Agenda for Prosperity
The Agenda for Prosperity—the economic agenda of the Administration—has propelled the economy to make the Philippines the frontrunner among emerging markets in the Asia Pacific region, concluding 2023 with a strong Gross Domestic Product (GDP) growth rate of 5.5%, beating Indonesia (5.0%), Vietnam (5.0%), Malaysia (3.8%), Thailand (1.9%), and Singapore (1.1%).
The World Bank in its Philippines Economic Update for June 2024 noted the Philippines’ robust growth leading to the creation of jobs; lower inflation; a stable banking system; steady progress in fiscal consolidation; an improving growth outlook, with economic growth projected to average 5.9% in 2024 to 2026, supported by robust domestic demand, strong services growth, and improved trade; and sustained poverty reduction.
Multilateral organizations have likewise affirmed the resilience of the Philippine economy, with the International Monetary Fund (IMF) giving the Philippines a 6.0% growth outlook for 2024-the highest among countries with similar credit ratings, such as Indonesia, Thailand, and Malaysia.
Macroeconomic assumptions
The Medium-Term Fiscal Program is built on the country’s strong macroeconomic fundamentals, recalibrated to reflect a sustainable and adaptive strategy to emerging external and domestic developments, ensuring that government targets will respond more directly to the needs of the Filipino people as strategic growth-enhancing fiscal consolidation is pursued.
GDP growth
Real GDP growth is projected to reach 6.5 to 7.5% in 2025, consistent with the average growth forecast of multilateral organizations and private sector analysts.
This will be sustained, if not exceeded in 2026 to 2028, projected at 6.5 to 8.0%. The projections are based on expected improved domestic demand, recovery in global trade, increased private investments, implementation of structural reforms, and strategic investments in infrastructure and human capital development.
Infrastructure development will continue to be a central pillar of our economic agenda, maintained at the strategic range of 5.0 to 6.0% of GDP annually until 2028.
For 2025, we project overall infrastructure disbursements to reach P1.538 trillion, or 5.4% of GDP, catering to the Build Better More infrastructure program, which is envisioned to address congestion, enhance physical connectivity, stimulate economic activities, and create quality jobs. By 2028, infrastructure spending is targeted to reach P2.140 trillion, equivalent to 5.8% of GDP.
Inflation
Amidst global headwinds, inflation in the medium-term is expected to stabilize at 2.0 to 4.0% from 2025 to 2028 through the proactive implementation of monetary policy measures and well-targeted government interventions.
Inflation is expected to decline to 3.5% in 2024 -much lower than the projected inflation of emerging markets (8.3%) and developing economies (5.9%) and further decrease to 3.3% in 2025, as projected by the Bangko Sentral ng Pilipinas.
Foreign exchange
The Philippine Peso is expected to remain stable, competitive, and resilient against persisting global headwinds, supported by increasing tourism receipts, growing Business Process Outsourcing (BPO) revenues, and robust overseas Filipinos remittances. In the medium-term, our target exchange rate will be 56 to 58 Php/USD for 2024 and 55 to 58 Php/USD from 2025 to 2028.
Dubai crude oil price
In the short-term, global oil prices are expected to stabilize at $70 to 85 per barrel in 2024 as the members and allies of the Organization of the Petroleum Exporting Countries (OPEC+) are expected to start relaxing voluntary production cuts.
This is expected to narrow down to $65 to 85 per barrel from 2025 to 2028 as global oil production rebounds over the medium-term, consistent with the backwardation observed in oil futures markets.
Imports and exports
Goods imports are expected to reach 2.0% in 2024 and 5.0% in 2025, supported by sustained infrastructure investments, but may be limited by the impact of global inflation and tight monetary policy.
Nonetheless, this is expected to rebound to 8.0% from 2026 to 2028. Meanwhile, goods export growth is projected to ascend to 6.0% from 2025 to 2028 from 5.0% in 2024, given improved outlook for the global semiconductor market, among other factors.
Fiscal program
With the evolving economic landscape, our revised Medium-Term Fiscal Program aims to balance fiscal consolidation with economic revitalization amid elevated inflation, high interest conditions, and ongoing geopolitical conflicts.
The urgent need to address climate change and environmental vulnerabilities also demands our immediate and unwavering attention.
Congressional tax policy reforms present an opportunity to invest in infrastructure and social development, fostering a resilient economy. We aim to reduce the deficit-to-GDP ratio from 5.6% in 2024 tο 3.7% by 2028, upholding fiscal prudence while addressing our nation’s development needs.
Revenue collections will rise from P4.270 trillion in 2024 to P4.644 trillion in 2025—an 8.8% increase-and reach P6.250 trillion in 2028.
We will also usher in key tax reforms that will revolutionize our tax system and ultimately enhance revenue, including Value-Added Tax on non-resident Digital Service Providers, Excise Tax on Single-use Plastics, Package 4 of the Comprehensive Tax Reform Program, the rationalization of the Mining Fiscal Regime, and the reform of the Motor Vehicle Users’ Charge.
We plan to escalate spending from P5.754 trillion in 2024 to P7.621 trillion by 2028, averaging 21.1% of GDP—a vital measure to support our nation’s growth and development-while prioritizing ongoing programs and shovel-ready projects in line with our Cash Budgeting System.
The National Budget also takes into account the 2025 National and Local Election spending ban, ensuring uninterrupted budget execution through the comprehensive release of appropriations.
Finally, deficit-which registered at P1.512 trillion or 6.2% of GDP in 2023-is programmed to improve at P1.483 trillion, or 5.6%, in 2024, and to continue to decline to P1.372 trillion, or 3.7%, in 2028.
The FY 2025 National Budget: Budget Aggregates and Dimensions
The proposed Fiscal Year 2025 National Budget can also be examined in terms of expense class, sectoral allocations, and classification of recipients.
By expense class
Maintenance and Other Operating Expenses (MOOE) will receive the highest allocation of the proposed FY 2025 National Budget with P2.421 trillion or 38.1%.
This budget will cover the day-to-day operations and priority programs of the National Government (NG), such as the Pantawid Pamilyang Pilipino Program (P114.2 billion) and National Health Insurance Program (P74.3 billion).
Additionally, this will cover the National Tax Allotment (NTA) (P1.035 trillion), Block Grant for the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) (P83.4 billion), and Local Government Support Fund (LGSF) (P15.8 billion), among others.
Personnel Services, with a proposed allocation of P1.757 trillion or 27.7%, will get the second highest share of the proposed FY 2025 National Budget.
This will finance the salaries, benefits, and other compensations of civil servants, including the P70.0 billion for the first and second tranches of the Salary Standardization Law (SSL) VI and P9.6 billion for the additional health care benefits of government personnel.
Capital Outlays, on the other hand, will receive P1.327 trillion or 20.9% of the proposed FY 2025 National Budget. This will fund the Build Better More and other major infrastructure programs, and the acquisition of goods and services that can be used beyond the fiscal year and added to the assets of the NG.
Receiving P848.1 billion, or 13.4% of the proposed FY 2025 National Budget, Financial Expenses will be used to settle, among others, the payments for fees, interest expenses, and other financial charges incurred by the NG.
By Sector
Social services get lion’s share
Aligned with the pursuit to fulfill the needs and aspirations of the Filipino people, the Social Services sector will receive the lion’s share of the proposed FY 2025 National Budget with P2.121 trillion or 33.4%. Of this amount, P1.067 trillion will fund programs, activities, and projects (PAPs) related to Education, Culture, and Manpower Development.
This also includes subsidies to Local Government Units (LGUs) under this sector, with an allocation of P416.4 billion; Health, with P321.8 billion; and Social Security, Welfare, and Employment, with P298.9 billion.
Economic services
The Economic Services sector-which covers communications, roads and other transport, agriculture and agrarian reform, as well as trade and industry-will be given a total allocation of P1.853 trillion or 29.2% of the proposed FY 2025 National Budget. The bulk of this amount, or P861.2 billion, will be used for the construction of roads and various public facilities across the country.
The General Public Services sector has a proposed budget allocation of P1.083 trillion, which accounts for 17.1% of the total budget. This allocation will be used to support government operations related to fiscal, electoral, and civil service functions. Some notable items included in this category are Public Order and Safety (P498.1 billion) and subsidies to LGUs under this sector (P314.7 billion), among others.
The Defense sector will use its P419.3 billion allocation, or 6.6% of the proposed FY 2025 National Budget, to ensure domestic security and protect our country against external threats.
A total of P876.7 billion, or 13.8% of the proposed FY 2025 National Budget, will go to Debt Burden for the servicing of government debt. This will cover net lending and interest payments on both local and foreign debt.
By recipient unit
A total of P4.116 trillion, or 64.8% of the proposed FY 2025 National Budget, will go to National Government Agencies to fund their operational expenses and priority programs and projects for 2025.
Some P489.4 billion of this amount will likewise be allocated to Special Purpose Funds, such as Miscellaneous Personnel Benefits Fund (MPBF) (P163.3 billion) and National Disaster Risk Reduction and Management Fund (P31.0 billion).
LGUs to get P1.184 trillion
LGUs will receive the second highest allocation with P1.184 trillion or 18.6% of the proposed expenditure program. The NTA, which will be funded with P1.035 trillion under this, will be used to empower our local governments to effectively implement their projects and practice fiscal accountability.
Government corporations, including net lending, will be given P204.5 billion budget, or 3.2% of the proposed FY 2025 National Budget, to fund the National Irrigation Authority, National Food Authority, and Philippine Fisheries Development Authority, among others.
The remaining P848.0 billion, or 13.4% of the proposed FY 2025 National Budget, will go to Creditors for domestic and foreign loan repayments.
Priority sectors
Following the Constitutional mandate for education to have the highest share in the government’s budget, the Education sector will receive the biggest portion of the proposed FY 2025 National Budget with P977.6 billion or 15.4%. This budget covers the allocations for government assistance and subsidies, basic education facilities, and Universal Access to Quality Tertiary Education (UAQTE), among others.
In pursuit of the Build Better More infrastructure program of the government, the Public Works sector gets the second highest allocation with P900.0 billion, or 14.2% of the proposed FY 2025 National Budget, to finance various public infrastructure, including, but not limited to, roads, bridges, flood management facilities, and academic buildings.
Receiving the third biggest allocation is the Health sector with P297.6 billion or 4.7%. Priority health programs, such as the National Health Insurance Program and the operations of public health facilities, will be funded under this.
The Interior and Local Government department, which will receive P278.4 billion or 4.4%, has the fourth highest allocation in 2025. This will fund the operations of the Philippine National Police (PNP), Bureau of Fire Protection (BFP), Bureau of Jail Management and Penology (BJMP), and other agencies that maintain peace and order nationwide.
This allocation includes the Philippine Commission on Women, allowing them to develop policies that promote gender-responsiveness in the government at all levels.
To uphold our sovereignty and territorial integrity, the Defense department has been earmarked with P256.1 billion to support their key programs and priorities, such as the Land Defense Program, Air Forces Defense Program, and Naval Forces Defense Program.
Social Welfare will get P230.1 billion, or 3.6%, to fund the Department of Social Welfare and Development (DSWD). This allocation will fund the Pantawid Pamilyang Pilipino Program and the Social Pension for Indigent Senior Citizens, among other programs for social protection.
To develop our agricultural industry and achieve food security, the Agriculture sector-comprising the Department of Agriculture (DA), its attached agencies, and the Department of Agrarian Reform (DAR)-will use its P211.3 billion allocation, or 3.3%, to support our farmers and fisherfolk.
Transportation, which covers the allocation for the Department of Transportation (DOTr), will receive P180.9 billion or 2.8%. This sector receives the highest growth among all sectors, recording a 144.8% increase from its P73.9 budget in 2024, to fulfill the funding requirements of major rail, land, air, and sea transportation projects.
The Judiciary, on the other hand, will be allotted P63.6 billion, or 1.0%, to support innovation in our justice system, as well as the day-to-day operations of the Supreme Court (SC) and lower courts.
Finally, the Justice department will get P40.6 billion, or 0.6%, to fund its Law Enforcement Program, Corrections Program, and Legal Services Program.