The Development Budget Coordination Committee (DBCC) has revised downwards its growth assumption for 2023 as it considered global headwinds such as the slowdown in major advanced economies.
In a press conference at the Department of Finance yesterday, Budget Secretary Amenah Pangandaman said the DBCC revised the 2023 gross domestic product (GDP) growth projection to six to seven percent, from the 6.5 to eight percent assumption in its July meeting.
“As the economy continues to reopen, domestic demand increased, and services and industry sectors improved. This enabled the country to register a 7.7 percent GDP growth rate for the first three quarters of the year, surpassing the 6.5 to 7.5 percent target range for 2022,” Pangandaman said.
“This momentum is expected to slightly decelerate in 2023 considering external headwinds such as the slowdown in major advanced economies. Nevertheless, growth is expected to pick up in 2024 to 2028 at 6.5 to eight percent,” she added.
The average inflation rate assumption for 2022 is slightly increased to 5.8 percent from the previous assumption of 4.5 to 5.5 percent given the persisting high prices of food and transport costs.
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 two to four percent in 2024 until 2028.
The assumption for the price of Dubai crude oil for 2022 is slightly adjusted to $98 to $100 per barrel considering global supply constraints on oil.
This is expected to gradually slide to $80 to $100 per barrel in 2023 before stabilizing at $70 to $90 per barrel in 2024 to 2028 as oil supply catches up with demand over the medium-term.
The peso-dollar exchange rate assumptions for 2023 and 2024 were adjusted upwards as the peso continues to depreciate due to heightened global uncertainties and aggressive monetary policy tightening of the US Federal Reserve, Pangandaman said.
This is expected to range from 54 to 55 to the dollar in 2022 and further increase to 55 to 59 in 2023.
“Nonetheless, the peso is expected to appreciate and stabilize at 53 to 57 (to the dollar) in 2024 to 2028, with the BSP’s (Bangko Sentral ng Pilipinas) policy normalization measures and expected pick-up in foreign exchange inflows,” the budget chief said.
As domestic demand recovers, Pangandaman said goods imports growth projection for this year is increased to 20 percent and revised to four percent in 2023.
Goods exports are adjusted downwards to four percent in 2022, and three percent in 2023 but are expected to stabilize at six percent in the medium term.
“Both trade assumptions reflect the gradual recovery of trade with the normalization of economic activities, globally and domestically,” Pangandaman said.
Revenue projection for 2022 is adjusted upwards to P3.5 trillion, from previous outlook of P3.3 trillion, following better-than-expected revenue performance from January to October 2022.
This is attributed to the improved tax collection and digitalization efforts of the government, Pangandaman said.
Revenue projections in the medium-term are expected to be from P3.7 trillion in 2023 to P6.6 trillion in 2028.
For 2022, full-year disbursement outlook is expected to reach P5 trillion, equivalent to 23 percent of GDP. “This is mainly attributed to large transfers to local government units, maintenance and other operating expenses as a result of the releases for the targeted cash transfer program and improved spending on infrastructure and other capital outlays as well as personnel services,” Pangandaman said.
Meanwhile, disbursements from 2023 to 2028 are also adjusted but are sustained above 20 percent of GDP, reaching P5.2 trillion in 2023 and expanding to P7.7 trillion in 2028.
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 three percent of GDP in 2028.
“This is aligned with the government’s Medium-Term Fiscal Framework, as the government continues to pursue a fiscal consolidation strategy over the medium term,” the budget chief said.
For 2024, the proposed cash appropriations is pegged at P5.8 trillion.
“This proposed budget will continue to provide the necessary funding requirements to support the administration’s overarching goal of economic recovery and prosperity towards inclusivity and sustainability,” Pangandaman said.
