PH economic managers hike 2023 inflation outlook, expect more taxes starting 2024

Prices of consumer goods in the Philippines are expected to climb significantly higher than the government’s target range this year, given the persistence of high prices of basic goods and necessities.

In a briefing in Manila City on Monday, the inter-agency Development Budget Coordination Committee (DBCC) said it hiked its inflation assumption for 2024 at 5.0% to 7.0%.

This is higher than the 2.5% to 4.5% assumption the body made in December, and also above the government’s target range of 2.0% to 4.0%.

Headline inflation clocked in at 7.6% in March, but core inflation — which excludes select food and energy items — stood at 8.0%, the highest since March 1999’s 8.1%.

“The average inflation rate assumption for 2023 is increased… given the persisting high prices of food, energy, and transportation costs,” Budget Secretary Amenah Pangandaman said.

Sought for comment, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco Dakila said the higher inflation assumption follows the year-to-date inflation print, which stood at 8.3%.

“We are projecting that the inflation path will continue to decelerate and will, barring the occurrence of any further shocks coming from the supply side, will begin to [fall in the target range] sometime between the fourth quarter of this year — most probably around October and November,” he said.

In its latest policy meeting, the Monetary Board of the BSP said it expects inflation to average 6.0% this year, and decelerate to 3.0% in 2024.

More taxes

Aside from faster growth in consumer prices, the economic cluster said it expects the implementation of additional taxes in 2024, as part of the Medium-Term Fiscal Framework (MTFF).

This includes the first four measures — 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.

“There will be three additional tax reform measures such as excise tax on sweetened beverages, motor vehicle road user’s tax, and mining fiscal regime that will be pursued starting in 2025,” the DBCC said in a joint statement.

The DBCC expects P53.7 billion in additional revenues from the excise tax on sweetened beverages, P15.8 billion from the motor vehicle road user’s tax, and P12.4 billion from the mining fiscal regime in their first year of implementation.

“The first four measures will have an impact on the 2024 budget and if we are being conservative, we are expecting revenues from the last three tax measures in 2025,” Finance Secretary Benjamin Diokno said in the same briefing.

He noted, however, that this could be sooner as the first four measures are already in pretty advance stages as they have already been approved in the House and deliberated on in the Senate, while the last three are still in the lower chamber.

The tax measures have driven an increase in the revenue projections of the DBCC — to P3.73 trillion this year, P4.184 trillion in 2024, P4.692 trillion in 2025, P5.255 trillion in 2026, P5.895 trillion in 2027, and P6.621 trillion in 2028.

It previously expected 2023 revenues at P3.706 trillion or 15.4% of the gross domestic product (GDP), before growing to P6.583 trillion or 17.4% of the GDP by 2028.

Economic growth

The DBCC on Monday retained its economic growth projection for the year at 6.0% to 7.0%, and from 6.5% to 8.0% from 2024 to 2028.

The government is set to release official first-quarter economic growth figures in May, with economic managers optimistic about sustained growth from the 7.2% print in the fourth quarter of 2022.

“The indications so far, looking at employment figures and other indicators, the numbers look good, I think, we think, but of course, we cannot tell you the definite numbers,” Socioeconomic Planning Secretary Arsenio Balisacan said.

“The main spruces of our growth have been domestic. Whether you look at it from the demand side, the supply side, services, anything, that we haven’t exhausted the possibilities,” he added.

The Philippine unemployment rate stood at 4.8% in February, unchanged from January but lower than 6.4% in February 2022. —KBK, GMA Integrated News