Macroeconomic targets to be reviewed today
ECONOMIC MANAGERS of President Rodrigo R. Duterte will meet today to review the country’s macroeconomic targets, barely a week after taking office.
The interagency Development Budget Coordination Committee ( DBCC) — a Cabinet- level cluster responsible for setting macroeconomic targets, revenue projections, borrowing level, aggregate budget level and expenditure priorities — are scheduled to convene at 10 a.m. today at the Bangko Sentral ng Pilipinas (BSP) headquarters in Manila.
“We will revisit the macro targets and assumptions prior to the finalization of the 2017 budget,” Budget secretary Benjamin E. Diokno said in a text message.
Former Budget chief Florencio B. Abad prepared a P3.35-trillion spending plan for 2017 before stepping down on June 30.
His successor, Mr. Diokno, has bared plans to peg 2017’s budget at up to P3.5 trillion to reflect the new government’s priorities.
The country’s macroeconomic targets were last set in February by economic managers under President Benigno S. C. Aquino III. Growth forecasts were cut to 6.8-7.8% for 2016 from 7-8%. The body also revised its 2017 estimate to 6.6-7.6%, kept the 2018 level at 7-8%, and pegged a 6.97.9% range for 2019.
The economic officials also adjusted other assumptions in the face of a “very challenging” external environment, referring to a slump in world crude prices and China’s economic slowdown.
Former DBCC officials had planned to conduct their final review last June 28, but did not push through.
Finance Secretary Carlos G. Dominguez III said the current target growth rate of 6.8-7.8% will “of course… be revisited.”
“Basically, the agenda in tomorrow’s [ Tuesday] DBCC meeting is how do we make… the Duterte budget for the rest of the year and for next year,” Mr. Dominguez told reporters on Monday.
“That’s basically reorienting according to what the mandate of the people was.”
Both Messrs. Dominguez and Diokno refused to give a ballpark figure for a doable growth target for 2016, saying details have yet to be discussed: “They will be the subject of tomorrow’s meeting. All numbers are tentative until approved by President Duterte.”
Socioeconomic Planning Secretary Ernesto M. Pernia said last month that a 6.5% GDP growth would be “feasible” for the year, picking up from the 5.9% expansion posted in 2015 but below the government’s current target.
But Mr. Diokno noted that plans to raise the deficit ceiling to 3% of gross domestic product (GDP) — in order to reflect ramped-up infrastructure spending — might not be doable this year. “It might be too soon to revise the 2016 deficit target since we don’t have a handle of the firstsemester numbers,” he said.
For his part, Mr. Dominguez said the DBCC will “probably” target to reach the deficit goal for this year. “Probably, we hope to do it this year, starting this year. We will talk to the DBCC and see about the target,” he said.
Mr. Dominguez acknowledged, however, the possibility that there might not be room for changing the deficit target next semester.
“One of our problems as you all know is what you call absorptive capacity. Let us not kid ourselves,” he said.
“Also, you may think we will try to force it, tapos hindi pala pwede ( but it turns out to be not feasible), so we have to be realistic. But that is our target.”
Adjustments made by the BSP pertaining to the country’s external position will also be taken up in Tuesday’s meeting. On June 17, BSP Deputy Governor Diwa C. Guinigundo announced a lower balance of payments ( BoP) forecast for the year of a $ 2- billion surplus, coming from an earlier $ 2.2- billion assumption and below the actual $ 2.6- billion surfeit recorded at end-2015.
The BSP also expects export growth to slow to 3% this year, from an earlier 5% projection; and import growth at 7% from December’s 10% forecast.
In explaining the reduced projections, Mr. Guinigundo said external concerns outweighed local developments. Specifically, the US Federal Reserve’s more dovish tone on raising interest rates, worries over the impact of the United Kingdom’s June 23 referendum to leave the European Union and China’s economic slowdown prompted the downward revisions.
Cash remittances from Filipinos abroad remain poised to increase by 4% this year, while revenues from the business process outsourcing sector are expected to grow 15%.
The country’s international reserves are still projected to hit $82.7 billion this year, while foreign direct investments are still expected to grow by 4% to $6.3 billion.
At the same time, the BSP expects a slight improvement in hot money to post a lower net outflow of $1.1 billion against $1.3 billion previously.
As of the February meeting, inflation was expected to clock 2- 4% from 2016 to 2018, while the peso was expected to range P45-48 against the dollar.
Economists and international credit raters remain bullish on the Philippine economy amid last week’s change in national leadership, as they expect Mr. Duterte to retain economic policies of the Aquino administration.
“If they are able to pass the baton seamlessly, we can expect strong growth of above 6% for the medium term as consumption remains strong, investments are boosted by still low interest rates and government spending pulls through to expand our productive capacity,” Nicholas Antonio T. Mapa had said in an earlier interview, referring to last week’s political succession.