FISCAL RISKS STATEMENT 2021 Development Budget Coordination Committee List of Acronyms and Abbreviations AFP Armed Forces of the Philippines AML Anti-Money Laundering AMRO ASEAN+3 Macroeconomic Research Office ASEAN Association of Southeast Asian Nations BCDA Bases Conversion and Development Authority BESF Budget of Expenditures and Sources of Financing BIR Bureau of Internal Revenue BLGF Bureau of Local Government Finance BOC Bureau of Customs BPF Budget Priorities Framework BPO Business Process Outsourcing BSFIs BSP-Supervised Financial Institutions BSP Bangko Sentral ng Pilipinas BTr Bureau of the Treasury CAAP Civil Aviation Authority of the Philippines CCC Climate Change Commission CIC Credit Information Corporation CL Contingent Liability COA Commission on Audit Coalition Coalition of Finance Ministers for Climate Action COVID-19 Coronavirus Disease 2019 CPSFP Consolidated Public Sector Financial Position DBCC Development Budget Coordination Committee DBM Department of Budget and Management DENR Department of Environment and Natural Resources DepEd Department of Education DILG Department of Interior and Local Government DND Department of National Defense DOF Department of Finance DOH Department of Health DOJ Department of Justice DOLE Department of Labor and Employment DOST Department of Science and Technology DPWH Department of Public Works and Highways DRRM Disaster Risk and Reduction Management DSWD Department of Social Welfare and Development ECQ Enhanced Community Quarantine FX Foreign Exchange FY Fiscal Year GAA General Appropriations Act GCG Governance Commission for GOCCs GCQ General Community Quarantine GDP Gross Domestic Product GFI Government Financial Institutions GIR Gross International Reserves GMS GOCC Monitoring System GOCC Government-Owned and Controlled Corporations GSIS Government Service Insurance System IATF-EID Inter-Agency Task Force on Emerging Infectious Disease ICC Investment Coordination Committee ICRS Integrated Corporate Reporting System IMF International Monetary Fund IRA Internal Revenue Allotment IRR Implementing Rules and Regulations IRRBB Interest Rate Risk in the Banking Book LCR Liquidity Coverage Ratio LGC Local Government Code LGU Local Government Unit LIBOR London Inter-Bank Offer Rate LRTA Light Rail Transit Authority MB Monetary Board MIAA Manila International Airport Authority MNFGC Major Non-Financial Government Corporations MOA Memorandum of Agreement MOOE Maintenance and Other Operating Expenditures MPBF Miscellaneous Personnel Benefit Funds MUP Military and Uniformed Personnel MWSS Metropolitan Waterworks and Sewerage System NARS National Asset Registry System NCR National Capital Region NDC Nationally Determined Contributions NDRRMC National Disaster Risk Reduction and Management Council NDRRMF National Disaster Risk Reduction and Management Fund NEA National Electrification Administration NEDA National Economic and Development Authority NFA Net Foreign Assets NFA National Food Authority NG National Government NHA National Housing Authority NIA National Irrigation Authority NIIP National Indemnity Insurance Program NPC National Power Corporation NPL Non-Performing Loan NSFR Net Stable Funding Ratio OF Overseas Filipinos OPEC Organization of the Petroleum Exporting Countries PAGASA Philippine Atmospheric, Geophysical and Astronomical Services Administration PAGCOR Philippine Amusement and Gaming Corporation PAP Programs, Activities and Projects PCIC Philippine Crop Insurance Corporation PCM Provinces, Cities and Municipalities PDP Philippine Development Plan PDNA Post Disaster Needs Assessment PES Performance Evaluation System PGF Pension and Gratuity Fund PHIC Philippine Health Insurance Corporation PHIVOLCS Philippine Institute of Volcanology and Seismology PNOC Philippine National Oil Company PPA Philippine Ports Authority PPP Public-Private Partnership PSA Philippine Statistics Authority PSALM Power Sector Assets and Liabilities Management Corporation QBs Quasi-Banks QRF Quick Response Fund ROE Return on Equity RRP Reverse Repurchase SAP Social Amelioration Program SBWSP Small Business Wage Subsidy Program SC Supreme Court SDG Sustainable Development Goals SSS Social Security System TDF Term Deposit Facility TSI Total Sum Insured UA Unprogrammed Appropriations UC Universal Charge U/KB Universal and Commercial Bank UCPB United Coconut Planters Bank WAIR Weighted Average Interest Rate WHO World Health Organization YoY Year-on-Year YTD Year-to-Date List of Tables Table 1. Philippines: Macroeconomic Performance for 2017-2019 and NG Budget Assumptions for 2020 Table 2. Philippines: Medium Term Revenue Program, 2020-2022 Table 3. Philippines: Breakdown of the National Disaster Risk Reduction and Management Fund Table 4. Philippines: Agency Quick Response Fund Breakdown Table 5. Philippines: Summary of Allotments and Cash Allocations Funded from the FY 2020 GAA Table 6. Philippines: Reprogrammed, Reallocated and Realigned Funds that can be Attributed to Existing PAPs Table 7. Philippines: Salient Features of the Unified Military and Uniformed Services Personnel Separation, Retirement and Pension Bill Table 8. Philippines: Contribution to the Consolidated Public Sector Financial Position, 2018 – 2021 Table 9. Philippines: Liabilities of the Government Corporate Sector and 14 Major Non- Financial Government Corporations (MNFGCs), 2018 Table 10. Philippines: Outstanding Government Guaranteed Debt to GOCCs, 2019 Table 11 Philippines: Outstanding NG Advances to GOCCs, 2018 – 2019 Table 12. Philippines: Net Budgetary Flows to GOCCs, 2018- 2019 Table 13. Philippines: Top GOCCs with Highest Dividend Remittances, January to July 17, 2020 Table 14. Philippines: Total Damages of Major Incidents in 2019 Table 15. Philippines: Number of Recorded Tropical Cyclone from 2017-2019 Table 16. Philippines: Typhoon Damages in 2019 Table 17. Philippines: Investment Requirement for Rehabilitation and Recovery by Sector Table 18. Philippines: Earthquakes in 2019 Table 19. Philippines: Marawi Recovery, Rehabilitation and Reconstruction Program Breakdown Table 20. Philippines: Agencies with Quick Response Fund Appropriation Table 21. Philippines: COVID-19 NG Responses List of Figures Figure 1. Philippines: Baseline NG Debt Dynamics, 2020-2025 Figure 2. Philippines: Contributions to Changes in Debt-to-GDP Figure 3. Philippines: Confirmed COVID-19 Cases by Date of Onset of Illness Figure 4. Contingent Risks per PPP Phase List of Boxes Box 1. Fiscal Risks and Recovery from Impact of COVID-19 Box 2. Bureau of Internal Revenue and Bureau of Customs Initiatives to Boost Revenue Collection Box 3. Philippine Program for Recovery with Equity and Solidarity Box 4. GOCCs COVID-19 Related Response Pursuant to Bayanihan Act to Heal as One Act and Dividend Remittances Box 5. Current Progress of Governance Commission for GOCCs Mandates Box 6. Moving Forward in Pursuit of Governance Commission for GOCCs Mandates Annex Annex A. Philippines: Updates on Tax Reform Packages Annex B. Philippines: PPP Life Cycle and Risk Factors Annex C. PPP Projects that have been submitted to the ICC and Awaiting Approval as of July 23, 2020 Annex D. Philippines: PPP Projects Operational Maturity Table of Contents I. Executive Summary ............................................................................................. 1 II. Macroeconomic Assumptions/Performance ....................................................... 3 A. Macroeconomic Assumptions and Performance .......................................... 3 B. Macroeconomic Risks .................................................................................... 8 III. Fiscal Performance ............................................................................................ 11 A. Revenue Performance .................................................................................... 11 B. Expenditure Performance ............................................................................ 17 IV. Public Debt ......................................................................................................... 28 V. Monetary Performance ....................................................................................... 31 VI. External Sector ................................................................................................... 33 VII. Financial Sector ................................................................................................. 34 VIII. Other Contingent Central Government Obligations .......................................... 42 A. Government-Owned and -Controlled Corporations........................................... 42 B. Public-Private Partnerships and Other Contingent Liabilities ............................ 60 C. Local Government Units .................................................................................. 61 D. Natural Disasters ............................................................................................ 66 I. EXECUTIVE SUMMARY A. The Philippine economy continued its strong growth momentum at 6.0 percent in 2019. However, the unraveling of the COVID-19 pandemic and the need to impose quarantine measures to control the outbreak unsprisingly weighed down economic activity, leading to a 9.0 percent first-half contraction. Domestic demand and major sectors on the supply side slumped from curtailed economic activities and limited mobility due to the initial imposition of the Luzon-wide enhanced community quarantine (ECQ) in response to the coronavirus disease (COVID-19) pandemic. The country is expected