Budget fiasco pushes economic team to lower growth target

MANILA, Philippines – Amid the deadlock between Senate and the House of Representatives over the 2019 budget, the government’s economic team revised its outlook on the economy: what was originally its lowest target for the year is now its highest.

The Development Budget Coordination Committee (DBCC) announced on Wednesday, March 13, that it is now aiming for the country’s Gross Domestic Product (GDP) growth to hit between 6% and 7%.

The original target was set at 7% to 8%. 

The GDP growth target for 2020 was likewise adjusted downward to 6.5% to 7.5%.

The DBCC warned that the longer the budget impasse lasts, the larger the adverse effect on the Philippine economy and its people. (READ: What to expect as gov't operates on a reenacted budget)

The budget reenactment's impact on economic growth is estimated at -0.7 to -0.9 percentage points (ppt) if the budget is reenacted until April 2019, -1.4 to -1.9 ppt if until August 2019, and -2.1 to -2.8 ppt under a full-year reenacted budget.

“We therefore urge Congress to transmit the 2019 national budget the soonest possible time to Malacañang so the government can sustain its investments on development priorities, namely public infrastructure and social services,” the DBCC statement read. 

The National Economic and Development Authority earlier projected economic growth to slip to as low as 4.2% to 4.9% should the country operate under a reenacted budget for the entire year.

Other targets and assumptions

Meanwhile, disbursements are targeted to reach P3.78 billion in 2019, assuming that the budget will be reenacted only for the first quarter of the year.

The said disbursement target is 19.4% of the GDP.

Given the current conditions, the deficit target was set at P631.5 billion for 2019 or 3.2% of the GDP.

The revenue collections, the DBCC said, is projected to reach P3.15 trillion in 2019 or 16.2% of the GDP.

Revenue measures from the tax reform program are projected to contribute P162.2 billion in 2019.

Meanwhile, the inflation assumption for 2019 still stands at 3% to 4%, and at 2% to 4% for 2020 to 2022.

The price of the Dubai crude oil has been adjusted downwards in the medium term. From 2019 to 2022, the price range is now projected to average between $60 and $75 per barrel.

Assumptions in goods exports growth were maintained at 6% from 2019 to 2022, while goods imports growth was still at 9% in 2019 and 8% from 2020 to 2022. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.