Government officials have adjusted downward their growth target for the Philippines this year to between 6 and 7 percent from an earlier target of 6.5 to 7.5 percent, citing the reimposition of tougher quarantine measures in the second quarter of the year due to the uptick in infection of the new coronavirus disease 2019 (COVID-19)..
Budget Secretary Wendel Avisado, Development Budget Coordination Committee (DBCC) chairman, said the peso-dollar exchange rate assumption for 2021-2024 is adjusted to 48 to 54 to the dollar, while the one-year treasury bill rate assumption is recalibrated to 2 to 3 percent for this year, 2 to 3.5 percent next year and 2 to 5.4 percent for 2023.
“This is primarily due to the Bangko Sentral ng Pilipinas’ liquidity-enhancing measures and the expected uptrend in global interest rates over the medium-term as the global economy recovers,” Avisado said.
He said the economy’s growth is projected to return to pre-COVID-19 levels of 7 to 9 percent by next year, though it would slow to 6 to 7 percent in 2023 and 2024.
The growth prospects are underpinned by “three interventions to arrest the spread of the virus and help the poor cope with the impact of the quarantines,” Avisado said.
“First is the intensified implementation of the prevent, detect, isolate, treat, and recover (PDITR) strategy and the full vaccination of the 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.
“Second is the reduction of 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. This could potentially reduce cases by around 51 percent, according to epidemiological models,” he added.
Avisado also said the government is looking at P170 billion in funding for “supplemental social support for those hardest hit by the pandemic as well as 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.
He said the adjustment in growth assumptions were based on current macroeconomic figures and projections, like the economic contraction of 4.2 percent in the first quarter of the year, just after the economy contracted 8.3 percent for the whole 2020.
The DBCC, meanwhile, kept its inflation target of 2 to 4 percent for 2021-2024.
The Dubai crude oil is projected to be priced around $50-70 per barrel over the medium-term “following the rise in global demand coupled with production cuts.”
The six-month LIBOR assumption was maintained at 0.2 to 1.2 percent for 2021, 0.3 to 1.3 percent for 2022, 0.5 to 1.5 percent for 2023 and 1 to 2 percent for 2024.
According to Avisado, goods exports will likely expand 8 percent this year and 6 percent by next year, while goods imports are also expected to grow 12 percent this year and 10 percent next year “as domestic demand bounces back.”
“For 2023 to 2024, goods exports and imports are projected to grow by 6 percent and 8 percent, respectively,” he said.
“Furthermore, the growth forecast for services exports is maintained at 6 percent for 2021 to 2024. On the other hand, services imports is projected to grow by 7 percent in 2021 and to 8 percent for 2022 to 2024,” Avisado added.
The DBCC kept its revenue target of P2.88 trillion for this year and P3.29 billion for next year, while collection in 2023 is seen to hit P3.59 trillion and P4 trillion in 2024.
“Estimated disbursements for this year have been adjusted upwards from P4.66 trillion to P4.74 trillion, owing mainly to funding requirements to support Bayanihan II, including the procurement of COVID-19 vaccines, among others,” Avisado said.
“Disbursements are projected to reach P4.95 trillion in 2022, and will further increase to P5.11 trillion in 2023 and P5.4 trillion in 2024,” he added.
Avisado said the estimated disbursements for 2022-2024 “already take into account the proposed Growth Equity Fund (GEF), which will be established in line with the implementation of the Supreme Court ruling on the Mandanas-Garcia case,” which aims to assist poorer local government units in addressing the problems of marginalization, unequal development and high poverty incidence.
“Given the revised revenue and disbursement program, the deficit program is adjusted upwards to 9.4 percent of GDP (gross domestic product) and 7.7 percent of GDP for 2021 and 2022, respectively,” Avisado said.
“The DBCC will continue to adopt a fiscal consolidation strategy to gradually bring the deficit back to pre-COVID-19 levels with a projected 6.4 percent of GDP rate in 2023 and 5.4 percent of GDP rate in 2024,” he added.
According to Avisado, the effects of the COVID-19 pandemic may remain in the short-term, “but we are optimistic the economy will return to its upward growth trajectory starting this year.”
He said this can be achieved through the accelerated implementation of the country’s recovery package and rollout of the national vaccination deployment to cover a broader segment of the population.
“We will continue to manage risks and push for the gradual and safe reopening of the economy after addressing the present spike so that people can return to work and the government can address hunger and poverty, while maintaining the strict compliance to minimum public health standards,” Avisado added.
