DBCC keeps economic growth target – BusinessWorld

By Beatrice M. Laforga, Reporter

THE GOVERNMENT retained its economic growth projection for this year, citing the drop in the number of new coronavirus disease 2019 (COVID-19) cases and the gradual reopening of the economy.

In a special meeting on Monday, the interagency Development Budget Coordination Committee (DBCC) maintained its gross domestic product (GDP) growth targets of 6-7% for 2021. The GDP targets for the next three years were also left unchanged at 7-9% for 2022, and 6-7% for 2023 to 2024.

“The DBCC is optimistic that the country’s GDP may return to its pre-pandemic levels as early as 2022,” the economic team said, adding the growth projections will be reviewed after the release of the second quarter economic data in August.

The government will continue to push for the “gradual and safe” reopening of the economy, alongside the full vaccination of residents in high-risk areas, the DBCC said.

It also emphasized the need to boost health capacity and prevent community transmission of the more contagious Delta variant.

The Health department on Monday reported 5,651 new COVID-19 cases, bringing active cases to 47,561.

“The relaxation of quarantine restrictions in high-risk areas must be complemented with an accelerated vaccination rollout, in order to allow more businesses to operate and consumers to participate in socioeconomic activities,” the DBCC said.

At the same time, the DBCC raised its export growth projection on the faster-than-expected global recovery, while lowering the budget deficit ceiling for the medium term as part of its fiscal consolidation program.

The DBCC increased the growth target for goods exports to 10% this year from the 8% it projected during the previous May 18 meeting, and maintained the 6% annual growth forecasts for 2022-2024.

Services exports are also expected to grow by 7% in 2022, higher than the previous 6% annual increase from 2021 to 2024.

“The projection was adjusted [for goods exports] following the expected recovery in external demand. Meanwhile, the outlook for the growth of services exports in 2022 was revised in line with the projected improvements in travel and BPO (business process outsourcing) receipts due to the gradual reopening of the economy,” the DBCC said.

The DBCC maintained its revenue projections for 2021-2024 and the estimated spending plans for 2021-2022. It lowered the spending forecast for 2023-2024 due to the revised estimates on the share of local government units from national taxes.

The economic team also reduced the projected spending for 2023 to P5.02 trillion from P5.11 trillion previously, while the forecast for the 2024 disbursements was also trimmed to P5.3 trillion from P5.4 trillion.

The infrastructure spending program was increased to P1.29 trillion for 2022, from P1.25 trillion penciled in last May.

However, the spending plan for infrastructure was trimmed to P1.28 trillion in 2023 and P1.35 trillion in 2024, from the previous estimates worth P1.53 trillion and P1.4 trillion, respectively.

“The infrastructure program will average 5.4% of GDP over the next three years,” it said.

Lowered spending targets will result in narrower budget deficits for the medium term, but the 9.3% of GDP cap set for 2021 was kept.

The DBCC cut its deficit ceiling to 7.5% of GDP in 2022 from the 7.7% ratio it adopted in May. It also lowered the threshold to 5.9% (from 6.4%) in 2023 and 4.9% (from 5.4%) in 2024.

“This fiscal consolidation strategy will continuously be adopted by the government to ensure fiscal sustainability over the medium-term and to bring back the country’s deficit to pre-pandemic levels,” it said.