The Development Budget Coordination Committee (DBCC) has kept its growth assumptions for the economy, but inflation forecasts were updated to take into consideration the persisting high prices.
In a press conference at the Department of Finance office in Manila yesterday, Budget Secretary Amenah Pangandaman said the average inflation rate assumption for 2023 is increased to five to seven percent from the previous assumption of 2.5 to 4.5 percent given the high food, energy and transport costs.
“Nevertheless, the government, through the Inter-Agency Committee on Inflation and Market Outlook, is committed to pursuing an all-of-government approach to continuously implement immediate and medium-term strategies to alleviate inflation, ensure food and energy security and return to the target range of two to four percent between 2024 and 2028,” Pangandaman said.
Meanwhile, the DBCC maintained its economic growth targets at six to seven percent for 2023 and 6.5 to eight percent for 2024 to 2028, even as it took into consideration the risks posed by geopolitical and trade tensions, possible global economic slowdown as well as weather disturbances in the country.
“The main sources of our growth have been domestic. Many of the sectors in our economy have not even recovered yet to pre-pandemic levels. There’s still going to have a lot of room for that, so we do think that there’s scope for continuing to grow robustly despite the external headwinds,” Arsenio Balisacan, National Economic and Development Authority secretary, said.
DBCC’s assumption for the price of Dubai crude oil for 2023 is lowered to $70 to $90 per barrel considering the global demand slowdown.
“The latest forecasts suggest that global crude oil prices will continue to decline in 2024 before stabilizing at $60 to $80 per barrel between 2025 and 2028 as the latest forecasts suggest falling global crude oil prices over the medium term,” Pangandaman said.
The peso-dollar exchange rate assumptions for 2023 were adjusted downwards to P53 to P57 to a dollar, and are expected to be maintained at the same level until 2028.
“This positive outturn is attributed to the BSP’s (Bangko Sentral ng Pilipinas) policy normalization measures, as well as expected inflows from improvements in tourism revenues and OFW (overseas Filipino worker) remittances due to the reopening of the country’s economy,” the budget chief said.
Goods exports and imports growth projections for this year remain at three percent and four percent, respectively, following the trend in near-term global demand outlook and trade prospects. These are expected to stabilize at six percent and eight percent, respectively, in the medium term.
Pangandaman said services exports are expected to perform better this year and next year following the recovery of the tourism sector and the continued resilience of the business process outsourcing sector.
Services exports growth forecast was adjusted upwards from 12 percent to 17 percent in 2023 and from six percent to 16 percent in 2024. Services imports growth estimates were also increased from eight percent to 11 percent in 2023 and from eight percent to 10 percent in 2024.
“The trade assumptions reflect the gradual normalization of economic activity both globally and domestically,” Pangandaman said.
She also noted revenue projections in the medium term are expected to improve from P3.73 trillion in 2023 to P6.62 trillion in 2028.
The DBM attributed the revision to the implementation starting 2024 of the following tax revenue measures under the Medium-Term Fiscal Framework: Package 4 or the Passive Income and Financial Intermediary Taxation Act, value-added tax on digital service providers, and excise taxes on single-use plastics and pre-mixed alcohol
Pangandaman said there will be three additional tax reform measures: the excise tax on sweetened beverages, motor vehicle road user’s tax and mining fiscal regime.
Finance Secretary Benjamin Diokno said revenues from the last three measures are expected in 2025.
“It could actually be sooner, we’re just being conservative because it depends on where it is now in the legislative process,” Diokno said.
“The first four measures are pretty advanced, it has been approved in the House and is now being deliberated in the Senate. The last three are still in the House,” he added.
Disbursements from 2023 to 2028 are revised upwards and are sustained above 20 percent of gross domestic product (GDP), reaching P5.23 trillion in 2023 and expanding to P7.77 trillion in 2028.
“This will enable the government to implement priority programs and strategies outlined in the 8-point Socioeconomic Agenda and the PDP (Philippine Development Plan) 2023-2028,” Pangandaman said.
“Following the revised revenue and disbursement program, we will maintain our commitment to fiscal sustainability by adhering to the target deficit for the period 2023 to 2028, which shall progressively decline from 6.1 percent of GDP in 2023 to three percent of GDP in 2028,” she added.
