DBCC lowers GDP growth forecast in 2018, raises inflation projection
The Duterte administration revised downward its economic growth forecast for the year as the government expects consumer prices, particularly fuel, to continue on the rise amid escalating trade tensions overseas.
The inter-agency Development Budget Coordination Committee (DBCC) lowered the country’s gross domestic product (GDP) projection to between 6.5 percent and 6.9 percent from an earlier estimate of around 7.0 percent to 8.0 percent for 2018.
But despite the revision in this year’s GDP projection, the DBCC kept its target at 7.0 percent to 8.0 percent for next year until 2022.
Budget Secretary Benjamin E. Diokno, who is also the DBCC chairman, said the adjustment aims “to reflect developments at the national and global level, including higher world oil prices, tightening of monetary policy in advanced economies, and higher domestic inflation.”
The DBCC also expects a much quicker inflation rate this year, revising upward its forecast to 4.8 percent to 5.2 percent from the original target of 2.0 percent o 4.0 percent.
Likewise, the economic managers raised the inflation forecast for 2019 to around 3.0 percent to 4.0 percent, while from 2020 to 2022, the DBCC maintained the range at 2.0 percent to 4.0 percent.
“We are optimistic that the administration has taken enough measures to tame inflation in the last quarter of 2018 and the full year of 2019,” the budget chief said.
Diokno said the revision is “consistent with the government’s assessment that inflation will go back to the target level by next year.”
Finance Secretary Carlos G. Dominguez III admitted that “we are living in a very different world now,” citing the trade war between the United States and China has escalated and has already affected the Philippine economy.
“Six months ago, there were only rumors of trade war, [and] starting in May the trade was has actually begun and has escalated adding large measure of uncertainty into the world economic picture. Therefore prices of oil have risen very steeply number one,” Dominguez said.
But despite uncertainty, Dominguez expressed that the country’s economy will weather the storms abroad, but at the same time remains not complacent.
“We are taking every deliberation action to address the issues that we are facing,” the finance chief said.
The DBCC also estimating a weaker revenue take this year from P2.846 trillion to P2.820 trillion, with the Tax Reform for Acceleration and Inclusion (TRAIN) contributing P63.3 billion.
Diokno said the implementation of the TRAIN Law has been very satisfactory.
For this year reason, Dominguez said “we urge Congress to pass the succeeding packages of the Comprehensive Tax Reform Program (CTRP) to put in place a simpler, fairer, and more efficient tax regime while financing the country’s development priorities.”
In addition, disbursements in 2018 are targeted to hit P3.346 trillion, or 19.1 percent of GDP. The adjustment from the original disbursement program of
P3.370 trillion is due to the updated revenue projec-
tions for the year.
“The strong momentum of public spending will be sustained as the government transitions to an annual cash-based budgeting system,” Diokno said.
The DBCC, meanwhile, maintained the budget deficit ceiling at 3.0 percent for 2018, equivalent to P526.8 billion.
“The deficit will then be expanded to 3.2 percent of GDP for next year, reaching P624.4 billion, in order to fund key priorities of the government, particularly infrastructure and investments in human capital development,” Diokno said.
“The deficit target will then be brought back to 3.0 percent of GDP in 2020 until 2022,” he added.