DBCC revises economic assumptions

The inter-agency Development Budget Coordination Committee (DBCC) disclosed a new set of economic assumptions for this year and next year to reflect the aggressive spending strategy of the government and the upward trend in consumer prices.

However, despite the change in some of the macroeconomic forecasts, economic managers still maintain the country’s economic growth target over the medium term at seven to eight percent.

“We remain optimistic and maintain our economic growth target for the medium-term at seven to eight percent on the back of higher household consumption from job expansion, as well as increased infrastructure spending from the Build Build Build program, and brighter prospects for the tourism sector,” Socioeconomic Planning Secretary Ernesto Pernia said.

“Moreover, we also expect higher public and private in- vestments through a reduction in the cost of doing business and reduced foreign

investment restrictions,” he said.

Budget Secretary Benjamin Diokno, who heads the DBCC, said members of the committee during their meeting yesterday approved a budget deficit program of P624.37 billion for 2019, equivalent to 3.2 percent of GDP. The latest figure was higher than the original target of P579.23 billion (three percent of GDP) approved by the committee in its previous meeting last April.

“We have slightly adjusted the deficit forecast in order to maintain the aggressive spending strategy that will sustain the momentum of the Build Build Build program,” Finance Secretary Carlos Dominguez said.

In addition to this, Dominguez said the government wants to accelerate its investments on social services, such as health and education.

“We assure our people that the government remains committed to fiscal discipline even as it pursues a level of productive spending that will clear the way to high and inclusive growth,” the finance chief said.

The committee also revised upward its inflation assumption for this year to range from four to 4.5 percent—higher than the previous forecast of two to four percent—in line with the high inflationary environment experienced in the first five months.

“This is in recognition of what already happened in the first five months,” Diokno said.

However, the budget chief said economic managers are confident inflation would taper off in the second half of the year, mainly due to stabilizing global oil prices and cost of rice.

The DBCC also approved a revenue program of P3.21 trillion for 2019, equivalent to 16.6 percent of GDP. This was 12.7 percent higher than the 2018 target of P2.85 trillion, and 0.3 percent higher than the previously approved 2019 revenue projection of P3.20 trillion.

Diokno attributed the increase to the reforms implemented by revenue agencies to improve tax policy and tax administration.

Economic managers have also lowered their trade assumptions for 2018. Imports are expected to grow by 10 percent this year, lower than the previous projection of 11 percent. Exports growth was likewise adjusted lower to nine percent from 10 percent.

Asked if the intensifying trade war between the US and China will have impact on the country’s trade, Pernia said it would not have a direct effect on the Philippines. However, he said the spat may dampen the global economy, which may affect the country’s exports.

Diokno said the DBCC also raised its assumptions for 364day Treasury-bill rates to three to 4.5 percent range, from the previous 2.5 percent to four percent, in response to the rate hikes made by the BSP.

Meanwhile, the DBCC said it has retained the government’s borrowing mix at 65:35 in favor of domestic borrowings this years, and at 75:25 mix next year.