DBCC keeps growth goal, sees higher inflation, deficit
The economy can still grow by 7.0-8.0 percent over the medium term despite challenges such as rising inflation and a weaker peso, with the government looking to spend even more next year in support of a massive infrastructure program.
Macroeconomic assumptions were reviewed on Monday by the interagency Development Budget Coordination Committee (DBCC), which decided to keep the gross domestic product growth target even as they raised this year’s inflation forecast and next year’s budget deficit goal, among others.
“We remain optimistic and maintain our economic growth target for the medium term at 7-8 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 in a press briefing after the DBCC meeting.
”Moreover, we also expect higher public and private investments through a reduction in the cost of doing business and reduced foreign investments restrictions,” he added.
The DBCC, which last April decided to maintain its growth and inflation expectations, said it was now revising the projected rise in consumer prices to 4.0-4.5 percent for 2018 from 2.0-4.0 percent, higher than the Bangko Sentral ng Pilipinas’ (BSP) 2.0-4.0 percent target.
“This is in recognition of what already happened in the first five months of the year,” Budget Secretary Benjamin Diokno said.
Inflation has topped 4.0 percent since March, hitting a five-year high of 4.6 percent in May. Most analysts expect a repeat for June, data for which will be released this Thursday. The BSP has a 4.3-5.1 percent forecast for the month and analysts polled by The Manila Times offered projections ranging from 4.6 percent to 5.0 percent.
Diokno said he was optimistic that June inflation would drop below 4.6 percent given a month-on-month easing.
With the government importing more rice and Congress expected to pass a rice tarrification law, he said that second-semester inflation would be “lower than its counterpart in the first half of the year.”
Given this, he said the DBCC decided to retain the previous 2.0-4.0 percent outlook for the next four years to 2022.
The budget deficit ceiling for this year, meanwhile, was kept at P523.682 billion or 3.0 percent of GDP but next year’s target was raised to 3.2 percent or P624.370 billion from the previous 3.0 percent.
“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 3rd said.
The programmed budget deficit will be maintained at 3.0 percent of GDP from 2020 to 2022.
Revenue collections, meanwhile, are still expected to reach P2.446 trillion this year, rising to P4.588 trillion in 2022. Disbursements will also be kept at P3.369 trillion in 2018 before rising to P5.362 trillion in 2022.
“Government spending will continue to be a growth driver for the Philippine economy, especially as we invest on public infrastructure and human capital development,” Diokno said.
Medium-term financing will continue to favor domestic borrowings, following a 65-35 mix in 2018, and a 75-25 mix from 2019 to 2022.
“We assure our people that the government remains committed to fiscal discipline even as it pursues a high level of productive spending that will clear the way to high–and inclusive–growth,” Dominguez said.
Lastly, the DBCC trimmed its imports and exports growth assumptions to 10 percent and 9 percent from 11 percent and 10 percent previously.
WITH A REPORT FROM ED VELASCO
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