DBCC keeps economic growth targets » Manila Bulletin Business


6.5%-7.5% in 2017; 7.0%-8.0% in 2018


By Chino S. Leyco


The inter-agency Development Budget Coordination Committee (DBCC) expects the economy would sustain its growth momentum as the nation’s macroeconomic fundamentals remain strong with an improving exports sector.

Meeting on Friday, the DBCC, which sets the country’s macroeconomic goals and assumptions, kept its gross domestic product (GDP) target for this year at a range of 6.5 percent to 7.5 percent and 7.0 percent to 8.0 percent in 2018.

Benjamin Diokno

Budget Secretary Benjamin Diokno, said in a briefing, that imports remain stable, while exports are expected to improve and the government’s fiscal policy will provide a boost to the country’s economic expansion.

Along with the GDP, the economic managers also maintained their inflation target at 2.0 percent to 4.0 percent for this year until the end of President Duterte’s term in 2022.

“This is based on estimates by the Department of Finance (DOF) that the higher excise taxes on petroleum, automobiles and sugar-sweetened beverages will have minimal effect on prices,” Diokno said.

“Furthermore, this inflation outlook remains within target as inflation forecasts of external institutions such as the International Monetary Fund, World Bank, and AP Consensus Forecasts belong within the said range,” he added.

Expected drivers of growth include construction and infrastructure development, primarily fueled by the administration’s “Build, Build, Build” program.

Also, the increase in government spending is seen to propel the economy upwards as the government plans to expand its investment in human capital.

In terms of oil future prices and forecasts, the DBCC maintained Dubai crude oil price assumptions for this year until 2022.

The economic team is projecting that oil price this year will stay at $40 to $55 per barrel, $45 to $60 next year as well as $50 to $65 from 2019 to 2022.

Diokno admitted that global economic and political developments have directly influenced the trend in emerging market currencies, including the peso, but they kept the US foreign exchange assumption this year at P48 to P50.

However, the DBCC forecast for the years 2018 to 2022 was adjusted to P48 to P51 against the US dollar.

“This is in response to the resumption of the US Federal Reserve’s monetary policy tightening, where the expectations of higher US interest rates and stronger demand for the US dollar could pose depreciation pressure on the peso,” Diokno said.

The DBCC also maintained 364-day Treasury bill rate assumptions at 2.5 percent to 4.0 percent, as the latest year-to-date 364-day rate falls within the DBCC-approved range.

Foreign interest rate assumption was retained at 1.0 percent to 2.0 percent this year and 1.5 percent to 2.5 percent from 2018 to 2022.

The DBCC expects that the US Federal Reserve’s policy normalization would be gradual and other major central banks will remain accommodative of the US’ monetary and policy adjustments.

The DBCC raised the goods export growth assumptions from 2.0 percent to 5.0 percent in 2017, 5.0 percent to 7.0 percent next year, and from 7.0 percent to 9.0 percent in 2019. Thereafter, exports growth will be maintained at 9.0 percent from 2020 to 2022.

Meanwhile, goods imports growth will be at 10 percent from 2017 to 2019 and will be maintained at 11 percent from 2020 to 2022.

For the Medium-Term Revenue Program, the DBCC approved revenue levels that take into account the impact of the first package of the Comprehensive Tax Reform Program passed by the Lower House (House Bill 5636).

In 2017, revenues are projected to reach P2.427 trillion, equivalent to 15.2 percent of GDP. Meanwhile, disbursements for 2017 are set to reach P2.909 trillion, equivalent to 18.3 percent of GDP.

With the implementation of the first tax reform package in 2018, revenues are then projected to increase to P2.841 trillion, which is 16.3 percent of GDP.

The revenue program is set to improve gradually to P4.504 trillion by 2022, equivalent to 17.8 percent of GDP.

The first tax reform package will contribute P133.8 billion in revenues for 2018, P233.6 billion in 2019, P272.9 billion in 2020, P253.0 billion in 2021, and P269.9 billion in 2022.

In terms of the Medium-Term Expenditure Program, the National Budget for 2018 is pegged at P3.767 trillion, equivalent to 21.6 percent of GDP, and higher by 12.4 percent from P3.350 trillion this year.

The expenditure program (Obligation Budget) is projected to reach R5.661 trillion come 2022, equivalent to 22.3 percent of GDP. The deficit-to-GDP ratio at 3.- percent will be maintained from 2017 to 2022.

The infrastructure budget for 2018 is being pegged at P1.101 trillion, equivalent to 6.3 percent of GDP. This level is a significantly higher than the P847.2-billion infrastructure budget in 2017, which is equivalent to 5.3 percent of GDP.

Infrastructure spending will rise up to P1.840 trillion come 2022, reaching as high as 7.3 percent of GDP.

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