The economic team of newly-installed President Rodrigo Duterte reduced the economic growth targets and projected a wider budget deficit this year and next.
Growth will probably reach 6 percent to 7 percent this year, Budget Secretary Benjamin Diokno told reporters in Manila following a meeting of the inter-agency Development Budget Coordination Committee.
That’s down from a projection of 6.8 percent to 7.8 percent made by the previous administration.
Diokno said the effects of election-related spending was tapering while the impact of El Niño dry spell continued to hurt agriculture output.
“Effect of election related spending is tapering. [There would be] slow agriculture output due to El Niño, weak infrastructure due to seasonality and weak external trade,” Diokno said, in explaining the reduced growth forecasts.
Duterte’s economic managers also revised downward the growth target for 2017 to a range of 6.5 percent to 7.5 percent from the previous estimate of 6.6 percent to 7.6 percent. DBCC kept the 7 percent to 8 percent targets for 2018 up to 2022.
“This is consistent with the strategy of the government to boost infrastructure spending,” Diokno said. The Philippine economy expanded 5.9 percent in 2015 and 6.9 percent in the first quarter of 2016.
Diokno said the government would submit a P3.35-trillion budget proposal for 2017. “It’s the same level [with the P3.35 trillion proposed by the Aquino administration]. The composition of the budget will be different,” Diokno said in a text message.
He said infrastructure spending would account for about 5.2 percent of gross domestic product next year.
Diokno said budget deficit would probably reach 2.5 percent of GDP this year and 3 percent in 2017 mainly because of revenue shortfalls. The government will continue to meet 80 percent of its borrowing needs from the domestic market and fund the remaining 20 percent abroad, he said.
DBCC also revised downward the export growth targets to 3 percent for 2016 and 6 percent for 2017 from the previous assumptions of 5 percent and 8 percent, respectively. It maintained the 10-percent exports growth target for the rest of Duterte’s term.
Imports growth target was revised downward to 7 percent for 2016 from the previous target of 10 percent. The targets were reduced to 10 percent for 2017 and 11 percent for 2018 from the earlier assumptions of 12 percent and 13 percent, respectively.
DBCC maintained a foreign exchange target of 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,” DBCC said.
Dubai crude oil price is projected to average $35 to $50 per barrel in 2016, $40 to $50 a barrel in 2017 and $45 to $60 a barrel in 2018, before climbing to $50 to $65 a barrel in 2019 to 2022.
The inflation rate target was retained at 2 percent. With Bloomberg
