DBCC cuts GDP forecast for 2022

PHILIPPINE economic managers have adjusted their medium-term macroeconomic assumptions while maintaining the budget program, taking into account government priorities, recent domestic developments and external pressures.

Budget Minister Amena Pangandaman announced at a briefing on Friday that recent domestic and international developments have resulted in the Development Budget Coordinating Committee (DBCC) assumption of gross domestic product (GDP) growth being slightly revised to 6.5-7.5 % this year.

This is a reduction from the earlier DBCC target of 7 to 8 percent.

“This growth will be sustainable and increase to 6.5-8.0% in fiscal year 2023-2028,” Pangandaman said.

In addition, the interdepartmental committee raised the inflation forecast for 2022 from 3.7–4.7 percent to 4.5–5.5 percent.

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Pangandaman said the estimated average inflation rate remains elevated this year “after a sharp rise in fuel and food prices as a result of the ongoing Russian-Ukrainian conflict and supply chain disruption.”

It is projected to return to the target range of 2 to -4 percent by 2024 through 2028, after adjusting slightly to 2.5 to 4.5 percent by 2023.

As oil supply is expected to catch up and stabilize over the medium term, the DBCC crude oil price assumption in Dubai has remained at $90 to $110 and $80 to $100 a barrel for this and next year, respectively. and was set at $70 to $90 per barrel for the period from 2024 to 2028.

The committee is also optimistic that the exchange rate of the Philippine peso against the US dollar will be in the range of 51 to 53 pesos this year, in line with its earlier assumption.

“The estimated PHP-USD (peso-dollar) exchange rate for the period 2023 to 2028 is projected at between 51 and 55 pesos against the US dollar due to heightened global uncertainty such as the US Federal Reserve’s aggressive monetary tightening, rejection of the market against the backdrop of the Russian-Ukrainian conflict. and rising world oil prices,” Pangandaman said.

Meanwhile, DBCC has maintained its 2022 revenue program of 3.30 trillion pesos, or 15.2 percent of GDP this year. In the medium term, a moderate upward trend is expected from 3.633 trillion pesos, or 15.3 percent of GDP, in 2023 to 6.589 trillion pesos, or 17.6 percent of GDP, in 2028.

“This will be achieved through the further implementation of the existing tax policy and tax administration reforms, supported by sustainable economic growth,” the head of the budget stressed.

On the other hand, she said that disbursements for 2022-23 would be maintained above 20 percent of GDP at 4.955 trillion pesos and 5.086 trillion pesos, respectively, to ensure the continued implementation of priority infrastructure and socio-economic development programs, among other things. .

The payments will further increase in the medium term from 5.402 trillion pesos (20.7 percent of GDP) in 2024 to 7.712 trillion pesos (20.6 percent of GDP) in 2028.

Pangandaman said that in light of the revised revenue and payment plan to ensure debt sustainability over the medium term, the planned budget deficit of 7.6 percent of GDP this year will be gradually reduced by at least 1 percent each year, starting from 6.1 percent. GDP. GDP in 2023 and ending at 3.0 percent of GDP in 2028.

This will be achieved, she said, by “improving spending efficiencies and aligning budgetary priorities enshrined in the administration’s two eight-point socio-economic programs, one for the short term and the other for the medium term.”

Pangandaman added that the Marcos administration will adhere to the record budget of 5.26 trillion pesos set by the Duterte administration’s economic planner for this year.

“As discussed at the DBCC meeting, we will stick to the 5.2 trillion pesos as previously announced … We will present the budget to Congress on August 22 to highlight and take into account the priority projects of, of course, the new cabinet. secretaries,” she said further.

For his part, Finance Minister Benjamin Diokno said that the debt-to-GDP ratio will normalize from this year’s level of 61.8 percent to 61.3 percent by 2023; to 60.6 percent by 2024; 59.3 percent by 2025; 55.7 percent by 2026; and 52.5 percent by 2027.

“In other words, by the end of the Marcos administration, we expect the public debt-to-GDP ratio to be below 60 percent, which is the holding threshold,” he explained.