Global risks cut PHL growth goal for 2023

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THE Cabinet-level Development Budget Coordination Committee (DBCC) maintained its GDP growth target for this year at 6.5 to 7.5 percent.

However, the DBCC revised downward its GDP growth target for 2023 to 6 to 7 percent from 6.5 to 8 percent on the back of global headwinds.

“This momentum is expected to slightly decelerate in 2023 and range from 6.0 to 7.0 percent,considering external headwinds such as the slowdown in major advanced economies,” Budget Secretary Amenah F. Pangandaman said at the DBCC press conference on Monday.

External headwinds

The external headwinds include the expected global economic slowdown as projected by the multilaterals that could impact the Philippines, National Economic and Development Authority Undersecretary Rosemarie Edillon said. This also includes China’s dynamic zero Covid policy, Edillon added.

“Nevertheless, growth is expected to pick up in 2024 to 2028 at 6.5 to 8.0 percent, as we push for government strategies and interventions of the Philippine Development Plan 2023-2028,” Pangandaman said.

“These include modernizing agriculture and agri-business, revitalizing the industry sector, and reinvigorating the services sector, among others,” she added.

Government’s economic managers also revised upward their assumption for the country’s inflation rate this year to 5.8 percent, from their July estimate of 4.5 to 5.5 percent “given the persisting high prices of food and transport costs.”

“Nonetheless, inflation is expected to moderate in the medium-term reaching 2.5 to 4.5 percent  in 2023 before returning to the target range of 2.0 to 4.0 percent  in 2024 until 2028,” Pangandaman, who chairs the DBCC, said.

Dubai crude oil price per barrel this year is also now projected to hover around $98 to $100 per barrel and is expected to taper down in the succeeding years ($80 to $100 in 2023; $70 to $90 in 2024 to 2028).

The DBCC also adjusted upwards its peso-dollar exchange rate assumptions for 2022, 2023 and 2024 as the currency continues to depreciate “due to heightened global uncertainties and aggressive monetary policy tightening of the US Federal Reserve.”

“This is expected to range from USD 54 to 55 in 2022 and further increase to USD 55 to 59 in 2023. Nonetheless, the peso is expected to appreciate and stabilize at USD 53 to 57 in 2024 to 2028, with the BSP’s policy normalization measures and expected pick-up in foreign exchange inflows,” Pangandaman said.

Exports of goods are now seen to grow 4 percent from 7 percent previously while imports of goods are expected to rise by 20 percent from an earlier estimate of 18 percent this year.

The economic managers now expect total revenues this year to reach P3.515 trillion from P3.304 trillion, driven by better collection performances of the Bureau of Internal Revenue and the Bureau of Customs. Total disbursements this year also inched up to P5.017 trillion from P4.954 trillion.

“Given the revised revenue and disbursement program, the DBCC revised its deficit projection to 6.9 percent of GDP for 2022 but maintained its target deficit for 2023 to 2028, which shall progressively decline from 6.1 percent of GDP in 2023 to pre-pandemic level of 3.0 percent of GDP in 2028,” Pangandaman said.

The DBCC has also announced the cap for the proposed national budget for 2024 at P5.750 trillion, which is 9.15 percent higher than next year’s P5.268 trillion national budget.

Image credits: Nonie Reyes