DBCC scales down ’19, ’20 growth goals
ASIDE from the budget impasse, the ill effects of El Niño and global headwinds such as global trade tensions have forced the government to revise downward its growth targets this year and in 2020.
The Development Budget Coordination Committee (DBCC) on Wednesday announced the revisions it made in the country’s growth targets and other macroeconomic assumptions.
During its 175th meeting, the DBCC scaled down the GDP growth target for the year to 6 to 7 percent, from the previous 7 to 8 percent. Economic growth next year is projected to reach 6.5 to 7.5 percent. The DBCC expects to hit the original growth target of 7 to 8 percent in 2021 and 2022.
“The 6 percent to 7 percent is an adjustment from the 7 to 8 percent which we used to have every year until 2022, and that is because it seems to be a foregone conclusion that the budget will be reenacted until April,” Socioeconomic Planning Secretary Ernesto M. Pernia told reporters in a news briefing in Pasay City.
“The El Niño phenomenon is also at the back of our minds,” he added.
Finance Secretary Carlos G. Dominguez III said global trade tensions could also dampen the country’s growth prospects for the year.
“Internationally, the unresolved issues between our major trading partners are a source of concern. We also know very well that any slowdown in growth of our trading partners will negatively affect our own growth opportunities,” Dominguez said.
The DBCC also revised downward its assumption for the price of Dubai crude oil. Its price is projected to average between $60 and $75 per barrel this year until 2022, from the previous assumption of $75 to $85 per barrel for 2019 and $70 to $80 per barrel in 2020.
The assumptions for the 364day Treasury bill rate and the six-month London Inter-bank Offered Rate (Libor) have also been adjusted, with the average T-bill rate seen to range from 5.5 to 6.5 percent in 2019 and 5.0 to 6.0 percent in 2020 until 2022.
Last year, the DBCC projected the T-bill rate to settle at 4.5 to 5.5 percent for 2019 until 2022.
The six-month Libor will range from 2.5 to 3.5 percent from 2019 up to 2022, coming from the previous assumption of 3.0 to 3.5 percent in 2019 onward.
Services exports growth was also adjusted downward to 10 percent in 2019 from 11 percent last year, while maintaining its growth assumptions at 11 percent from 2020 to 2022.
The DBCC retained its projection for goods exports growth at 6 percent from 2019 to 2022. The projected rate of imports expansion was retained at 9 percent in 2019 and 8 percent from 2020 to 2022.
The inflation forecast was retained at 3 percent to 4 percent this year and 2 to 4 percent in 2020 to 2022.
The foreign-exchange rate assumption from 2019 to 2022 was also retained at 52 to 55.
In terms of the government’s medium-term fiscal program, revenue collections are projected to reach P3.15 trillion for this year, equivalent to 16.9 percent of GDP. The government’s revenue target for the year was revised downward from P3.208 trillion.
The DBCC said revenue measures from the tax-reform program are projected to contribute P162.2 billion to the government’s coffers in 2019, taking into account the Tax Reform for Acceleration and Inclusion (TRAIN) law. The government’s disbursements are expected to reach P3.78 trillion in 2019, assuming that it will operate under a reenacted budget in the first quarter of the year. The disbursement target is equivalent to 19.4 percent of GDP.
Given the approved revenue and disbursement programs, the corresponding nominal deficit target is set at P631.5 billion in 2019, equivalent to 3.2 percent of GDP.
The deficit target will then be maintained at 3.0 percent of GDP from 2020 to 2022.