DBCC to check assumptions anew

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THE INTERAGENCY Development Budget Coordination Committee (DBCC) plans to meet again on Aug. 27 to consider “new” macroeconomic assumptions like inflation, the central bank chief said on Tuesday.

“… [M]ay meeting ang DBCC… sa Aug. 27… tentative… to look at new assumptions. Baka maga-adjust na naman ng inflation doon (Inflation assumptions may be adjusted again in that meeting),” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno told reporters on the sidelines of an event in Quezon City, adding that the meeting will focus on 2020 and 2021 assumptions.

The DBCC last met on July 18, during which it cut inflation and international trade assumptions but kept overall economic growth targets intact.

On Aug. 6, however, the government announced July inflation at a 31-month-low 2.4% and two days later reported that second-quarter economic growth clocked in at 5.5%, the slowest in four years.

Asked if latest economic growth data will be factored in at the next meeting, Mr. Diokno replied: “Hindi na ‘yan eh. Sa tingin ko blip lang ‘yan eh… (It won’t, I think it was just a blip.) It won’t happen again.”

The DBCC, which is composed of the Department of Budget and Management, the Department of Finance, the National Economic and Development Authority, the Office of the President and the BSP, sets macroeconomic and fiscal assumptions of the government.

Asked about factors that could affect assumptions in the upcoming meeting, Mr. Diokno said: “Possible slowdown, in fact, some predicted recession in the US… this is for 2020-2021. Tapos ’yung oil prices ngayon bagsak na naman. Tapos ’yung likely outcome US-China trade war. Tapos isasama mo na rin diyan ‘yung what’s happening in Hong Kong (Oil prices have gone down again. Then the likely outcome of the US-China trade war and what’s happening in Hong Kong).”

In its 176th meeting last July 18, the DBCC slashed inflation rate assumption to 2.7-3.5% from 3-4% previously amid a cooling general increase in prices of widely used goods and services after multi-year highs seen last year. Inflation assumptions for 2020 up to 2022, when President Rodrigo R. Duterte ends his six-year term, were maintained.

The interagency body revised upward its peso-dollar outlook to P51-53 against the greenback this year from P52-55 previously.

Merchandise export growth assumption was trimmed to two percent this year from six percent previously due to slowing global demand, but maintained at six percent from 2020 to 2022.

Likewise, goods import growth was slashed to seven percent this year from nine percent previously but kept it at eight percent from 2020 to 2022.

Growth of service export assumption was reduced to nine percent for this year from 10% and set also at nine percent from 11% previously for 2020 to 2022, while service import growth was trimmed to three percent this year from five percent, to four percent for 2020 from six percent, and to five percent for 2021 to 2022 from seven percent previously.

The assumption for dollar price of Dubai crude oil — used as a benchmark for local fuel products — was maintained at $60-75 per barrel for 2019-2022.

At the same time, gross domestic growth targets were maintained at 6-7% for this year, at 6.5-7.5% in 2020 and at 7-8% in 2021-2022.

The DBCC also maintained projected revenues at P3.15 trillion for this year, equivalent to 16.4% of GDP, while disbursements are targeted at P3.77 trillion (down slightly from P3.78 trillion as of March projections), or 19.6% of GDP.

For next year, state revenues are seen to increase to P3.54 trillion (down from P3.676 trillion in the previous projection), equivalent to 16.7% of GDP, while disbursements are programmed at P4.21 trillion (down from P4.313 trillion), equivalent to 19.9% of GDP.

Given this fiscal picture, the budget deficit ceiling will be kept at equivalent to 3.2% of GDP this year, and slightly raised to that level from 2020 to 2022 from three percent as of March projections. — Mark T. Amoguis