The Marcos administration is proposing a record ₱7.2 trillion national budget for fiscal year 2027, an increase of six percent over the current year, as the government seeks to counteract an economic slowdown triggered by geopolitical conflict and domestic spending scandals.

According to National Budget Memorandum No. 158 issued by the Department of Budget and Management (DBM), the proposed spending plan is ₱407 billion higher than the ₱6.793 trillion allocated for 2026. The 2027 budget is roughly 21.7 percent of the country’s gross domestic product (GDP), which economic planners estimate will reach ₱33.23 trillion that year.

Acting Budget Secretary Kim Robert C. De Leon indicated that prolonged offshore tensions, particularly the four-month-old United States-Iran war, have significantly disrupted global supply chains and compromised the country’s previous economic assumptions.

De Leon also noted that domestic fallout from high-profile flood control corruption controversies in 2025 severely impacted macroeconomic fundamentals, constraining revenue collection and slowing poverty reduction efforts.

In response, the Cabinet-level Development Budget Coordination Committee (DBCC) has recalibrated its fiscal policies to shield vulnerable sectors from the Middle East conflict, as well as structural threats from climate change and the El Niño weather phenomenon.

The administration faces a tight fiscal environment because of rising commitments to automatically appropriated items, including interest payments and statutory local government allocations. Local government units are scheduled to receive a record ₱1.32 trillion in national tax allotments in 2027, an 11 percent increase from ₱1.19 trillion this year, in a bid to stimulate regional economies amid volatile global energy prices.

Reflecting these headwinds, the DBCC lowered its economic growth forecast for 2026 to a range of 3.5 percent to 4.5 percent from an earlier estimate of five percent to six percent. Growth projections for 2027 were similarly reduced to a range of five percent to six perceny, with economic expansion expected to cap out at six percent through 2030.

Inflationary pressures also prompted an overhaul of earlier targets. Headline inflation for 2026 is now projected to hit between six percent and seven percent, before easing to a range of four percent to five percent in 2027. This marks a significant shift from the DBCC’s previous long-term target of two percent to four percent. Consequently, the medium-term exchange rate assumption for the Philippine peso has been weakened to a range of ₱60.00 to ₱62.00 per US dollar.

Total government disbursements for 2027 are now projected at ₱6.90 trillion, widening the expected fiscal deficit to ₱1.69 trillion from an earlier forecast of ₱1.59 trillion. The budget department expects the national budget to hold flat at ₱7.2 trillion in 2028 before rising to ₱7.64 trillion in 2029 and ₱7.95 trillion in 2030.

Despite the higher near-term deficit, the government maintains that its deficit-to-GDP ratio will decline by an average of 0.5 percentage point annually from a programmed 5.4 percent in 2026 to 3.5 percent by 2030.

Revenue assumptions have been trimmed for most of the forecast period, with the exception of 2027, where target collections were raised to ₱5.205 trillion.

The DBCC projects that revenues will expand by an average of nearly eight percent annually over the medium term, driven by tax digitalization initiatives and stricter compliance measures.

De Leon stated that the government will prioritize the completion of ongoing flagship infrastructure projects and human capital development to insulate the domestic economy from further external shocks.