Adjustments made on growth projections
New variants and ECQ to affect growth projections
MANILA – The emergency of new COVID-19 variants and the reimposition of Enhanced Community Quarantine in the National Capital Region (NCR) Plus are during the second quarter of the year made the government’s economic planners to lower the Gross Domestic product (GDP) growth projection to 6.0 to 7.0 percent from 6.5 to 7.5 percent for 2021.
In a briefing late Tuesday afternoon, the members of the Development Budget Coordination Committee (DBCC) said they reviewed the government’s medium-term macroeconomic assumptions, fiscal program, growth targets for Fiscal Years 2021 to 2024. The review was due to the recent developments in the domestic and external environments, the release of updated data and in preparation for the Fiscal Year 2022 National Expenditure Program (NEP).
They said the country’s GDP is expected to return to pre-COVID-19 levels by an upward trajectory at 7.0 to 9.0 in 2022 and will continue to grow by 6.0 to 7.0 percent in 2023 and 2024.
According to the DBCC, the country’s growth prospects and economic recovery hinge on the arrest of COVID-19’s spread and assisting the poor cope with the impact of strict quarantine measures.
In a statement released during the briefing, the DBCC said the first strategy is the intensified implementation of the prevent, detect, isolate, treat and recover (PDITR) strategy and the full vaccination of the residents in areas with the highest risk, including NCR Plus, Pampanga, Cebu City, and Davao City. They said targeting these areas would reduce the COVID-19 transmission throughout the country.
The second strategy is to reduce the fap from detection to isolation of COVID-19 positive cases from 7 to 5 days, including the use of digitally-assisted contact tracing. This could potentially recue cases by around 51 percent per epidemiological models.
The third, according to the DBCC, is the provision of around P170 billion to fund supplemental social support for the hardest hit communities as the provision of funds for improved health protocols. The House of Representatives are deliberating on the proposed measure and said to be contingent on raising additional savings and revenues to remain deficit neutral.
The Council approved the revised growth projects based on macroeconomic data and assumptions like the GDP growth rate for the first quarter of 2021 improved with a slower contraction of 4.2 percent from an 8.3 percent decline in the fourth quarter of 2020. The economy grew by 0.3 percent based on a seasonally adjusted quarter-on-quarter basis.
The average inflation target for 2021 to 2024 is maintained at 2.0 to 4.0 percent.
According to the DBCC statement, the price of Dubai crude oil per barrel is estimated to increase to US$50 to 70 per barrel over the medium-term due to the rise in global demand and production cuts.
The Philippine peso – US Dollar exchange rate assumption was also adjusted to P48 to 52 against the US Dollar for 2021 to 2024.
The 3634-day Treasury bill rate assumption was recalibrated to 2.0 to 3.0 percent for 2021 and 2.0 to 3.5 percent for 2022 and was set at 2.5 to 4.0 percent for 2023 to 2024. This is due to the Bangko Sentral ng Pilipinas’ (BSP) liquidity-enhancing measures and the expected uptrend in global interest rates over the medium-term as the global economy begins to recover.
The six-month LIBOR (London Interbank Offered Rate) assumption was kept at 0.2 to 1.2 percent for 2021, 0.3 to 1.3 percent for 2022, 0.5 to 1.5 percent for 2023 and 1.0 to 2.0 percent for 2024.
The also project an expansion of goods exports to 8.0 percent by 2021 and 6.0 percent by 2022 as positive trends are seen in global trade. Goods imports are also expected to increase by 12.0 percent this year and 10.0 percent in 2022 with the domestic demand bouncing back. For 2023 to 2024, goods exports and imports are projected to increase by 6.0 percent and 8.0 percent, respectively.
The DBCC added the growth forecast for services exports has been maintained at 6.0 percent for 2021 to 2024. Meanwhile, services imports is projected to grow by 7.0 percent in 2021 and to 8.0 percent for 2022 to 2024.
The government targets to generate P2.88 trillion for 2021 and increased to P3.29 trillion for 2022 which was earlier approved by the DBCC in December 2020. Economic activities are expected to increase over the medium-term with revenue collections at P3.59 trillion for 2023 and P4.0 trillion in 2024.
Estimated disbursements for the year have been adjusted upwards from P4.66 trillion to P4.74 trillion to fund requirements to further support Bayanihan II, including the procurement of COVID-19 vaccines. Disbursements are projected to reach P4.95 trillion in 2022 and will increase further to P5.11 trillion in 2023 and P5.40 trillion in 2024.
The estimated disbursements for 2022 to 2024 already took into account the planned Growth Equity Fund (GEF) which will be established in accordance with the implementation of the Supreme Court Ruling on the Mandanas-Garcia case. The GEF aims to assist poorer Local Government Units (LGUs) in addressing the problems of marginalization, unequal development, and high poverty incidence.
With the revised revenue and disbursement program, the deficit program has been adjusted upwards to 9.4 percent of GDP for 2021 and 7.7 percent of GDP for 2022. The DBCC said they will continue to adopt a fiscal consolidation strategy to gradually bring the deficit back to pre-COVID-19 levels with a projected 6.4 percent of GDP rate in 2023 and 5.4 percent of GDP rate in 2024.
The DBCC maintained the effects of the COVID-19 pandemic may remain in the short-term but they expressed optimism that the economy will return to its upward growth trajectory beginning this year. This will be achieved with accelerated implementation of the country’s recovery package and rollout of the national vaccination deployment to include a bigger segment of the population.
The Council vowed to manage risks and push for the gradual and safe reopening of the economy after attending to the current spike in COVID-19 cases for a greater number of people return to work and for the government to address hunger and poverty though maintaining strict compliance to minimum public health standards.
Among those who attended the briefing were Budget and Management Secretary Wendel E. Avisado, Finance Secretary Carlos G. Dominguez, NEDA Secretary Karl Kendric T. Chua and BSP Deputy Governor Francisco G. Dakila. The DBCC Statement was read by DBM Secretary Avisado. (Melo M. Acuña)
Despite the Vaccination program, consumers are still few at Robinson's Galleria at 4:00 P.M. today. (Melo M. Acuna)