The inter-agency Development Budget Coordination Committee (DBCC) adjusted its macroeconomic assumptions and fiscal program after the country officially entered a recession as a result of the coronavirus pandemic.
Following the updated report on the impact of the COVID-19 pandemic on tourism, trade, and remittances, the DBCC now expects a heavier contraction in the country’s gross domestic product (GDP) from between 2.0 percent and 3.4 percent to 5.5 percent this year.
Nonetheless, the DBCC remains is confident that the country is on track to economic recovery with GDP growth expected to reach 6.5 percent to 7.5 percent in 2021 and 2022.
The projected economic recovery is anchored on government’s continued “pump-priming activities,” the DBCC said.
“The priority implementation of the Build, Build, Build infrastructure program and revitalization of the industry and services sectors are expected to lead the recovery,” the inter-agency, which sets the government’s economic targets, said.
For this year’s inflation rate assumption, the DBCC narrowed it down to a range of 1.75 percent to 2.75 percent due to subdued demand, while the 2021 to 2022 projections were retained at 2.0 percent to 4.0 percent.
“This means that prices in the typical consumption basket of Filipino families will remain stable and predictable,” DBCC said.
The assumption for the price of Dubai crude oil per barrel for 2020 was also $35 to $45 per barrel from $23 to $38 per barrel based on the futures market. For 2021 and 2022, the assumption has been maintained at $35 to $50 per barrel.
On the exchange rate, the range of the peso-US dollar rate assumption was narrowed to P50 to P52 for 2020 and maintained at P50 to P54 from 2021 to 2022.
Amid slowdown of global trade due to the COVID-19 pandemic, the DBCC expects goods exports and imports for 2020 would further contract by 16.0 percent and 18.0 percent, respectively.
However, the growth of goods exports is projected to pick up to 5.0 percent while growth of goods imports is expected to reach 8.0 percent by 2021 to 2022, consistent with the expected pace of recovery in global and domestic demand in the following years.
Overseas Filipino remittances, meanwhile, are projected to fall by 5.0 percent this year but are expected to return to the normal annual growth rate of 4 percent in 2021 and 2022.
Meanwhile, estimated revenue collections this year were reduced from the P2.61 trillion projection last May to P2.52 trillion, or 13.4 percent of GDP.
"The decline is a result of deeper contraction in real GDP growth and the P42 billion in estimated foregone revenues from the implementation of the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act,” DBCC said.
On the other hand, estimated disbursements for this year inched up by P110 billion to P4.34 trillion, equivalent to 23.percent of GDP.
“The additional spending anticipates the P140.0 billion additional appropriations for the proposed Bayanihan to Recover as One (Bayanihan II) Act which is being pursued in Congress,” DBCC said.
For 2021, revenues are projected to slightly recover to reach P2.72 trillion, or 13.2 percent of GDP, while disbursements are expected to increase to P4.47 trillion, or 21.6 percent of GDP, consistent with the P4.506 trillion budget proposal.
Revenue and disbursement projections are estimated at P3.03 trillion, or 13.3 percent of GDP, and P4.68 trillion, or 20.5 percent of GDP, respectively, by 2022.
Given the revenue and disbursement plans approved by the DBCC, the deficit target over the medium-term is expected to increase from 8.4 percent to 9.6 percent of GDP in 2020, from 6.6 percent to 8.5 percent in 2021, and from 5.0 percent to 7.2 percent in 2022.
Despite these adjustments in deficit spending, the DBCC is confident that the national government’s debt will be kept at a sustainable and responsible level, within the 60 percent internationally-recommended debt threshold, by 2022.