Growth targets maintained; trade prospects worsened

GROWTH targets for this year and the next five years were retained by economic managers on Friday, but other assumptions have been revised to reflect recent developments.

Most of the revisions were relatively minor, with the exception of import and export growth forecasts for 2023, which were significantly lowered due to worsening global terms of trade.

“We have kept our [economic] growth projections of 6.0-7.0% for 2023 and 6.5-8.0% for 2024-2028, taking into account both internal and external risks,” the Budget Coordinating Committee said in a statement. development (DBCC).

“These forecasts have already factored in the risks associated with El Niño and other natural disasters, global trade tensions and disruptions to the value chain, among other factors,” he added.

Economic managers said they also remain confident that the Philippines will be able to achieve upper middle income status within the next two years.

Strategies to achieve this include “timely and adequate imports, taking preventive measures to combat El Niño, strengthening biosecurity, increasing agricultural productivity, and advancing legislative reforms, including the Livestock, Poultry and Dairy Competitiveness and Development Act, among others” .

The DBCC lowered its inflation forecast for 2023 to 5.0-6.0 percent from 5.0 percent to 7.0 percent, given the steady decline since February.

“The inflation rate is expected to return to the target range of 2.0 to 4.0 percent by 2024 and 2028 as the administration, through the Inter-Agency Committee on Inflation and Market Forecasts, takes proactive measures to address the underlying drivers of inflation. ” He said.

“This, together with appropriate BSP (Bangko Sentral ng Pilipinas) monetary policy action, will help ensure a return to inflation target during the policy period.”

The biggest change was in growth assumptions for merchandise imports and exports this year, which were cut to 1.0 percent and 2.0 percent, respectively, from the previous 3.0 percent and 4.0 percent, “following the short-term outlook for global demand and trade prospects.

Growth is expected to stabilize at 6.0 percent for imports and 8.0 percent for exports over the medium term, unchanged from the previous review.

Bangko Sentral Deputy Governor Francisco Dakila Jr. said that “the biggest factor in the slowdown in exports will come from electronic products, which may be due to a reduction in global demand for semiconductors.”

“In terms of imports, this is also largely due to lower commodity prices, as well as weaker exports and manufacturing activity,” he added.

The peso/dollar forecast for this year has been adjusted to 54-57 pesos: $1 from 53-57 pesos: $1 earlier. Assumptions for 2024 and 2025-2028 have been kept at 53-57 pesos:$1.

Meanwhile, crude oil forecasts in Dubai have held at CAD$70-90 a barrel this year and next, and $60-80 a barrel between 2025 and 2028, “as recent future prices and forecasts continue to suggest fall in world prices for crude oil in the medium term”. .”

As for the medium-term fiscal program, the estimated income for 2025 has been raised to 4.201 trillion pesos from 4.184 pesos previously.

The payout target for 2024 has also been raised to 5.564 trillion pesos from 5.547 trillion pesos, but the shortfall is still expected at 1.363 trillion pesos.

Budget projections for this year and 2025-2028 remain unchanged.

The DBCC said disbursements will continue to exceed 20.0 percent of gross domestic product (GDP) over the medium term, prioritizing infrastructure and socio-economic development.

The deficit is also projected to gradually decrease from 6.1% of GDP this year to a pre-pandemic level of 3.0% by 2028.

The DBCC said that next year’s proposed national budget of 5.768 trillion pesos, up 9.5% from this year, will continue to prioritize spending items that promote social and economic transformation through infrastructure development, food security, digital transformation and human capital development. .

“Recognizing the competing needs of government programs against a background of limited resources, we will ensure that the National Expenditure Program for Fiscal Year 2024 (Fiscal Year) includes only ready-to-implement agency proposals,” he added.

Budget Secretary Amena Pangandaman said the government intends to present the draft 2024 budget to Congress three to five days after the President’s July State of the Union address.