DBCC adopts 6.5%-7.5% growth target
President Marcos’ economic managers lowered the government’s growth target for this year.
The Development Budget Coordination Committee (DBCC), an inter-agency body tasked to set the government’s macroeconomic assumptions, expects the country’s gross domestic product (GDP) to grow by 6.5 percent to 7.5 percent in 2022.
The new DBCC assumption in aligned with Finance Secretary Benjamin E. Diokno’s earlier GDP pronouncement of 6.5 percent to 7.5 percent growth for 2022, but slower than the Duterte administration’s earlier goal of 7.0 percent to 8.0 percent.
In a briefing, Budget Secretary Amenah F. Pangandaman said the slightly adjusted in the GDP forecast was due to the “recent external and domestic developments.”
For 2023 to 2028, the DBCC however expects the growth to expand by around to 6.5 percent to 8.0 percent.
Meanwhile, the DBCC expects the average inflation rate to remain elevated and is projected to range from 4.5 percent to 5.5 percent in 2022, well above the government’s target 2.0 percent to 4.0 percent.
Still, inflation is driven by the uptick in prices of fuel and food as a result of the ongoing Russia-Ukraine conflict and disrupted supply chains, the DBCC said.
For 2023, inflation was also slightly adjusted to 2.5 percent to 4.5 percent, and but it is seen to return to the target range of 2.0 percent to 4.0 percent by 2024 until 2028.
Moreover, the assumption for the price of Dubai crude oil is set at $70 to $90 per barrel for 2024 to 2028 as oil supply is expected to catch up and stabilize over the medium-term.
The peso-dollar exchange rate assumption for 2023 to 2028, on the other hand, is projected at 51 to P55 against the greenback.
According to the DBCC, the upward adjustment was due to heightened global uncertainty such as the aggressive monetary policy tightening by the US Fed, market aversion amid Russia-Ukraine conflict, and increased global oil prices.
In addition, the goods imports growth is forecast at 8.0 percent for 2024 to 2028, while the goods exports growth is projected at 6.0 percent for 2023 to 2028.
On the fiscal side, revenue collections are projected to show a gradual upward trend over the medium-term from P3.633 trillion, equivalent to 15.3 percent of GDP in 2023 to P6.589 trillion, or 17.6 percent of GDP in 2028.
“This will be achieved through the continued implementation of existing tax policy and tax administration reforms, bolstered by a robust economic growth,” DBCC said.
Meanwhile, disbursements for 2022 to 2023 will be maintained above 20 percent of GDP at P4.955 trillion and P5.086 trillion, respectively, to ensure continuous implementation of priority programs on infrastructure and socio-economic development, among others.
Disbursement will further increase over the medium-term from P5.402 trillion (20.7 percent of GDP) in 2024 to P7.712 trillion (20.6 percent of GDP) in 2028.
Given the revised revenue and disbursement program, the budget deficit will be gradually reduced by at least 1.0 percentage point every year starting at 6.1 percent of GDP in 2023 to 3.0 percent of GDP in 2028 to ensure debt sustainability over the medium-term.
“This will be achieved through improved spending efficiency and alignment of budget priorities that are anchored on the administration’s two eight-point socio-economic agendas, one for the near-term and another for the medium-term,” DBCC said.
In addition, DBCC said the government is targeting an infrastructure spending-to-GDP ratio of 5.0 to 6.0 percent annually between 2023 to 2028, and a 9.0 percent poverty rate by 2028.
“The targets shall be anchored on the implementation of coherent strategies, policy discipline, and fiscal sustainability,” the inter-agency body said.