THE government’s economic team slashed its growth projection for the Philippine economy this year to 6 to 7 percent from its previous forecast range of 6.5 to 7.5 percent, given the impact of reimposed strict lockdown measures in the National Capital Region Plus (NCR Plus) where Covid-19 cases surged.
The Cabinet-level Development Budget Coordination Committee (DBCC) also downgraded its growth projection for the country’s GDP next year to 7 to 9 percent, down from its previous forecast of 8 to 10 percent in DBCC’s December meeting.
Budget Secretary and DBCC Chair Wendel E. Avisado said the lowering of GDP growth projection for this year was done “in view of
the emergence of new Covid-19 variants and the reimposition of Enhanced Community Quarantine (ECQ) in the National Capital Region (NCR) Plus area during the second quarter of the year.”
Apart from Metro Manila, NCR Plus includes Laguna, Bulacan, Rizal, and Cavite.
Despite this, Avisado said they expect the country’s GDP to go back to prepandemic level next year.
“Further, GDP is projected to return to pre-Covid-19 levels by growing at 7 to 9 percent in 2022, and will continue to grow by 6 to 7 percent in 2023 and 2024,” he said.
To support the country’s economic recovery, the DBCC is backing three measures that will help arrest the spread of the virus and help the poor cope with the impact of quarantines.
These include a P170-billion “supplemental social support” for the hardest hit by the pandemic and to fund improved health protocols.
“A version of this proposal is currently being deliberated in the Lower House, and is contingent on raising additional savings and revenues to remain deficit neutral,” Avisado said.
On top of this, the DBCC also stressed the need for intensified implementation of the prevent, detect, isolate, treat, and recover (PDITR) strategy and the full vaccination of residents in areas with the highest risk, such as the NCR Plus, Pampanga, Cebu City, and Davao City.
“By targeting these areas, Covid-19 transmission can be dramatically reduced throughout the country,” he said.
Moreover, the economic team also said reducing the gap from detection to isolation of Covid-19 positive cases from 7 to 5 days, such as the use of digitally assisted contact tracing, could potentially reduce cases by around 51 percent.
Fiscal deficit
The DBCC also adjusted upwards its projection for the country’s deficit-to-GDP ratio this year to 9.4 percent from 8.9 percent previously as it now expects disbursements to reach P4.74 trillion, higher than its previous estimate of P4.66 trillion.
The rise in disbursements for this year is mainly due to funding requirements to support Bayanihan II, including the procurement of Covid-19 vaccines, among others.
Revenue collection for this year is still expected to hit P2.88 trillion.
Finance Secretary Carlos G. Dominguez III expressed concern on the projected rise in the country’s fiscal deficit.
“It’s really getting to be very concerning so any additional stimulus program, such as that was mentioned of P170 billion, has to be revenue-neutral,” he said.
To fund this supplemental social support, the finance chief said the fund can be sourced from savings in the 2020 national budget and additional dividend remittances from government-owned and -controlled corporations (GOCCs).
“We will be meeting again in the next few days to determine the sources of these funds,” he said.
For 2022, the government expects the deficit-to-GDP ratio to reach 7.7 percent, up from its old assumption of 7.3 percent.
The previous revenue assumption of P3.3 trillion for 2022 has been cut by DBCC to P3.29 trillion.
It still expects disbursements to hit P4.95 trillion next year.
For 2023 and 2024, the country’s fiscal deficit is expected to revert to pre-Covid levels with a projected rate of 6.4 percent of GDP in 2023 and 5.4 percent of GDP in 2024 as the DBCC continues adopting a fiscal consolidation strategy.
As for the country’s debt-to-GDP ratio, Dominguez said they still project that to be below 60 percent until year-end.
Inflation, oil, forex
Meanwhile, the DBCC also kept its inflation target of 2 to 4 percent this year until 2024.
However, it estimates an increase in the price of Dubai crude oil per barrel to USD 50 to 70 over the medium term following the rise in global demand coupled with production cuts. This is up from their previous estimate of USD 35 to 50 dollar per barrel for 2021 and 2022.
The DBCC kept its foreign exchange rate assumptions of P48 to P53 against the US dollar for 2021 to 2024.
Due to recent positive trends in global trade, the DBCC upgraded its growth projections for goods imports this year to 12 percent, from only 8 percent previously. Next year, it is expected to grow by 10 percent, higher than previous assumption of 8 percent.
Goods exports are projected to rise by 8 percent this year from 5 percent previously. For 2022, it is seen to expand by 6 percent from only 5 percent in DBCC’s December meeting.
For 2023 and 2024, goods imports and exports are projected to grow by 6 percent and 8 percent, respectively.
Further, growth forecast for services exports is maintained at 6 percent for 2021 to 2024. On the other hand, services exports are projected to grow by 7 percent in 2021 and by 8 percent for 2022 to 2024.
Image courtesy of Nonoy Lacza