The government has decided to lower its growth target for next year to between 7 percent and 8 percent from an earlier target range of 7.5 percent to 8.5 percent due to volatilities in the international markets.
It is, however, keeping this year’s growth target at 7 percent to 8 percent.
The government remains optimistic that public spending will be faster than the previous year but decided to lower the growth assumption for next year due to global developments.
Budget and Management Secretary Florencio Abad said that this year, agencies can now spend “as much as they should” since they have become more familiar with the reforms implemented in the budget process, .
Speaking after the Development and Budget Coordinating Committee (DBCC) meeting, Abad said government agencies “have to shape up with their spending abilities.”
Abad said it would be more prudent to cut the growth target next year considering the “global environment as well as the domestic challenges.”
He added that while prospects are looking good, the government is still cautious on the impact of such global developments on the domestic economy.
He noted in particular the risks coming from China’s slowing economy, the recession in Japan, and an improving US economy. Abad said the DBCC, however, kept the central bank’s inflation rate target of 2 percent to 4 percent this year.
“Based on the report of the central bank, as approved by DBCC, the inflation target was set at 2 percent to 4 percent, which is also the same as the DBCC-approved inflation target.
And we see this as being maintained to 2016 all the way to 2018,” he explained.
Meanwhile, Abad said that the government’s P42 to P45 to a dollar assumption will be kept until 2018 as recommended by the Bangko Sentral ng Pilipinas (BSP).
“The position of the BSP is the peso may weaken but it will continue to be generally or broadly stable. And some of the assessments that they presented to the committee is that depreciation pressures could be triggered by capital outflows due to uncertainties in global dynamics.”
However, Abad added that there are still favorable domestic economic prospects that should support the peso, such as the steady remittances from overseas Filipino workers, earnings from the business process outsourcing sector, the expected increase in tourism receipts, and the impact of the country’s investment grade rating.
Meanwhile, the DBCC also kept its budget deficit cap at 2 percent of gross domestic product or about P284 billion for 2015.
As for the 2015 expenditure program, the government is set to spend P2.68 trillion including the supplementary budget approved by Congress and the unused funds for the Yolanda rehabilitation.