ECONOMIC MANAGERS now expect gross domestic product (GDP) to expand by 7-8% this year, as the outlook may be clouded by the prolonged Russia-Ukraine war, economic slowdown in China and monetary policy tightening in the United States.
After a meeting on Tuesday, the Development Budget Coordination Committee (DBCC) said in a statement that it adjusted macroeconomic assumptions, fiscal program and growth targets for 2022 to 2025 “to take into account recent domestic trends and external developments.”
The DBCC sets the official macroeconomic assumptions and fiscal program.
“The Philippine economy’s strong recovery in the first quarter of 2022 has moved us closer to our goal of achieving at least 7% growth this year,” the Cabinet-level committee said, referring to the 8.3% GDP in the January to March period.
“However, in light of heightened external risks such as the Russia-Ukraine conflict, China’s slowdown, and monetary normalization in the United States, the full-year growth target was slightly revised from 7-9% to 7-8% for 2022.”
Socioeconomic Planning Secretary Karl Kendrick T. Chua said the DBCC kept the lower bound of the original target since the domestic economy showed significant improvement in the first quarter, despite the external risks.
“Nonetheless, we will grow by 7 to 8% this year, supported by our very strong domestic economy. The more we shift to Alert Level 1, begin face-to-face schooling, accelerate vaccination, especially of children and seniors, we can fully reopen the economy,” he said during a briefing after the DBCC meeting.
“We will continuously monitor and improve our economic domestic base to counter these external shocks.”
The DBCC said it kept the GDP growth target at 6-7% for 2023 to 2025.
The average inflation rate assumption was raised to 3.7-4.7% for 2022, from 2-4% previously, reflecting the impact of soaring oil and food prices caused by the ongoing Russia-Ukraine war and supply chain disruptions.
However, the DBCC is expecting inflation to return to the 2-4% target range for 2023 to 2025.
The assumption for the price of Dubai crude oil per barrel is now projected at $90-$110 this year, significantly higher than the previous projection of $68-70 per barrel. This is expected to drop to $80-$100 per barrel in 2023, and $70-$90 per barrel in 2024 and 2025.
Global oil prices spiked after Russia’s invasion of Ukraine in late February, bringing pain at the pump for consumers around the world.
For this year, the DBCC raised the export growth target to 7% from 6% previously, and import growth goal to 15% from 10% previously.
The export growth target was kept at 6% for 2023 to 2025. However, imports are expected to expand by 6% in 2023 and by 8% in 2024 to 2025.
The DBCC revised its revenue projections upward as it expects economic activity to continue improving over the medium term.
It now targets to generate P3.633 trillion in revenues (15.3% of GDP) for 2023, up from P3.624 trillion previously. The government expects to collect P4.063 trillion (15.6% of GDP) in 2024, and P4.549 trillion (16.1% of GDP) in 2025.
The expenditure program was also increased to P5.086 trillion (21.3% of GDP) and P5.392 trillion (20.8% of GDP) for 2023 and 2024, respectively. Disbursements are seen to hit P5.723 trillion (20.2% of GDP) in 2025.
“Given the revised revenue and disbursement program, the DBCC maintained its target deficit at 6.1% of GDP for 2023, 5.1% of GDP for 2024, and projected the figure of 4.1% of GDP for 2025 as the government continues to adopt a fiscal consolidation strategy to lower the deficit back to pre-COVID-19 levels,” it said.
The DBCC said next year’s proposed national budget is now at P5.268 trillion, representing 22.1% of GDP.
“The DBCC remains strongly committed to exercise prudent macroeconomic and fiscal management in prioritizing expenditures that translate to the betterment of micro communities in the country,” it said.
Meanwhile, the Department of Finance (DoF) said it is in the process of creating a fiscal consolidation program for the incoming Marcos administration.
“The DoF is working double time on hammering out the details of a fiscal consolidation and resource mobilization program,” Finance Assistant Secretary Valery A. Brion said. “We will publicly announce the components of this package in the coming days.” — Tobias Jared Tomas