SAYING the previous government’s growth targets were no longer attainable, the Duterte administration’s economic managers on Tuesday slashed the official gross domestic product (GDP) targets for this year and next.
The Development Budget Coordination Committee (DBCC), the inter-agency body that sets the government’s macroeconomic, revenue and spending targets, expects the economy, as measured by GDP, to grow within 6 percent to 7 percent this year, instead of 6.8 percent to 7.8 percent.
“We prefer to be conservative this year because the first half of the year is over and we really have just six months to work on in terms of achieving higher growth rate,” Socioeconomic Planning Secretary Ernesto Pernia said in a news conference after the first DBCC meeting under the Duterte Administration at the Bangko Sentral ng Pilipinas.
The DBCC expects GDP growth to slow in the second half because “the impact of election spending will wane, there are still problems in agriculture, and because of weak external economy, and poor exports,” Budget and Management Secretary Benjamin Diokno said.
The 2017 GDP growth target was also slashed as a result, to 6.5 percent to 7.5 percent, from the 6.6 percent to 7.6 percent target range of the Aquino administration.
For the rest of the term of President Rodrigo Duterte, or from 2018 to 2022, the DBCC set the annual GDP targets to within 7 percent to 8 percent.
With the GDP growth targets reduced, other goals also had to be adjusted. The revenue target for this year was lowered to P2.573 trillion from the previous P2.696 trillion, while the expenditure target was kept at about P3 trillion.
The budget deficit cap for this year was cut to 2.5 percent of GDP from the previous ceiling of 3 percent.
Diokno said there was a shortfall in collections at the Bureau of Internal Revenue and the Bureau of Customs.
But officials said the new targets were consistent with the new government’s objective of boosting infrastructure spending to more than 5 percent of GDP.
The government plans to accelerate infrastructure spending by ordering public works contractors to work 24 hours a day, seven day a week, Diokno told reporters.
The DBCC also revised downward the target for export growth to 3 percent and 6 percent for 2016 and 2017, respectively, from the previous 5 percent and 8 percent. It maintained the 10 percent export growth target for the rest of Duterte’s term.
The target for growth in imports was also revised downward to 7 percent for this year from the previous 10 percent. For 2017 and 2018, import growth targets were also revised downward to 10 percent from 12 percent, and 11 percent from 13 percent, respectively.
The exchange rate was expected to range from P45 to P48 per US dollar from 2016 to 2018.
“The country’s firm macroeconomic fundamentals and strong external position could support the broad stability of the peso over the medium-term,” the DBCC said in a statement.
The target inflation rate, meanwhile, was retained at 2 percent to 4 percent for 2016 to 2018.
The DBCC affirmed that the 2017 national budget would be hiked to P3.3 trillion from this year’s P3.002 trillion.
“As the government finalizes the 2017 budget proposal for submission to Congress in August later this year, the committee will continue to remain watchful of the risks and capitalize on the opportunities from both the external and domestic fronts,” the DBCC statement said.
These risks, Diokno said, included weather disturbances because of La Niña, the impact of the United Kingdom’s exit from the European Union and the effect of the slowing economies of Japan and China on the Philippines’ external trade, foreign direct investments and remittances.