Gov’t slashes economic growth targets due to reenacted budget, El Nino

The inter-agency Development Budget Coordination Committee (DBCC) on Wednesday bared lower economic growth targets for this year and the next, in light of the reenacted budget and the expected dry season this year.

At a press conference in Manila City, the DBCC said it now projects this year's gross domestic product (GDP) at 6.0 to 7.0 percent, lower than the earlier announced target range of 7.0 to 8.0 percent.

"That already takes into account a reenacted budget up to April which is the least harmful of the other subsequent possible reenactments," Socioeconomic Planning Secretary Ernesto Pernia told reporters.

Pernia earlier in the day said that the reenacted budget until April 2019 would bring down the full-year gross domestic product to 6.1 to 6.3 percent. If the budget is passed in August,  4.9 to 5.1 percent if the , and 4.2 to 4.9 percent with a full-year reenacted budget.

"Essentially the reenactment, and also at the back of our minds, we have also the El Nino phenomenon," explained Pernia.

This comes as the state weather bureau earlier forecast a probable occurrence of El Niño which may come in during the first quarter of the year and which may affect 47 provinces.

Finance Secretary Carlos Dominguez III also cited that overseas concerns could also dent the Philippine economic growth in the short term.

"Internationally also, the unresolved issues between our major trading partners is a major source of concern. We also know very well that any slowdown in growth are trading partners will definitely negatively affect our own growth possibilities," he said.

Inflation

In the same press conference, the DBCC also announced assumptions for other macroeconomic indicators such as inflation which it now expects at a tighter range of 3.0 to 4.0 percent this year from its earlier forecast of 2.0 to 4.0 percent.

Forecasts for 2020 to 2022 meanwhile remained unchanged at 2.0 to 4.0 percent.

Dubai crude

"In additional, the assumption for the USD price of Dubai crude oil per barrel has been adjusted downwards in the medium-term. From 2019 to 2022, the price range is now projected to average between $60 to 75 per barrel," Janet Abuel, officer-in-charge at the Department of Budget and Management (DBM), said in the same press conference.

Foreign exchange

Meanwhile, the DBCC assumption was retained to hover around the P52-P55 against the US dollar from 2019 to 2022.

Trade

Abuel said the assumptions in goods exports growth were likewise maintained at 6.0 percent from 2019 to 2022, and goods imports growth at 9.0 in 2019, and 8.0 percent from 2020 to 2022.

Meanwhile, service exports assumptions were adjusted downward to 10 percent in 2019, but unchanged at 11.0 percent from 2020 to 2022. Service imports were also retained at 5.0 percent in 2019, 6.0 percent in 2020, and 7.0 percent in 2021 and 2022.

Revenues

In terms of government revenues, the DBCC said it now expects to generate P3.15 trillion in 2019, lower than the earlier announced P3.2 trillion.

"That is an adjustment realizing that maybe the targets were higher by 50 billion based on the actual 2018 figures," said Dominguez.

"Only part of the amnesty bill was approved and that has to do with the estate tax amnesties and we expect because the rest of the amnesty bill had not been passed, that's why we downgraded the collections," he explained. — BM, GMA News