The inter-agency Development Budget Coordinating Committee on Monday maintained its 2022 gross domestic product growth forecast, but trimmed the target for next year in the face of external headwinds.
It kept the growth forecast this year at 6.5 percent to 7.5 percent, taking into account the economic expansion of 7.7 percent in the first three quarters which already exceeded the target range.
“As the economy continues to reopen, domestic demand increased and services and industry sectors improved. This enabled the country to register a 7.7-percent gross domestic product growth rate for the first three quarters,” DBCC said in a briefing.
DBCC is composed of the heads of the Department of Finance, Department of Budget and Management and National Economic and Development Authority.
It said the growth momentum was expected to slightly decelerate next year and range from 6 percent to 7 percent because of external headwinds such as the slowdown in major advanced economies.
“Nevertheless, growth is expected to pick up in 2024 to 2028 at 6.5 to 8 percent, as we push for government strategies and interventions of the Philippine Development Plan 2023-2028,” it said.
These strategies include the modernization of the agriculture and agri-business sectors, revitalizing the industry sector and reinvigorating the services sector.
The DBCC said poverty incidence would gradually improve, likely reaching the 9 percent target by 2028.
The average inflation rate assumption for 2022 was adjusted upwards to 5.8 percent from the previous estimate of 4.5 percent to 5.5 percent, given the persistent high prices of food and transport costs.
“Nonetheless, inflation is expected to moderate in the medium term, reaching 2.5 percent to 4.5 percent in 2023 before returning to the target range of 2 to 4 percent in 2024 until 2028,” the DBCC said.
The assumption for the price of Dubai crude oil for 2022 was slightly adjusted to a range of $98 to $100 per barrel considering global supply constraints on oil. This is seen to gradually slide to $80 to $100 per barrel in 2023, before stabilizing at $70 to $90 per barrel in 2024 to 2028.
“Likewise, the peso-dollar exchange rate assumptions for 2023 and 2024 were adjusted upwards, as the peso continues to depreciate due to heightened global uncertainties and aggressive monetary policy tightening of the US Federal Reserve. This is expected to range from $1:54 to 55 in 2022 and further increase to $1:55 to 59 in 2023,” DBCC said.
The peso is expected to appreciate and stabilize at 53 to 57 against the dollar in 2024 to 2028, with the Bangko Sentral’s policy normalization measures and expected pickup in foreign exchange inflows, it said.
It said that as domestic demand recovers, goods imports growth projection for this year was increased to 20 percent and revised to 4 percent in 2023. Exports growth was lowered to 4 percent in 2022 and 3 percent in 2023, but was expected to stabilize at 6 percent in the medium term.
Revenue projection for 2022 was adjusted upwards to P3.5 trillion, following better-than-expected revenue performance from January to October on improved tax collection and digitalization efforts of the government.
Full-year disbursement outlook is expected to reach P5 trillion in 2022, or equivalent to 23 percent of the GDP.
Given the revised revenue and disbursement program, DBCC revised its deficit projection to 6.9 percent of GDP for 2022 but maintained the target deficit for 2023 to 2028, which will progressively decline from 6.1 percent of GDP in 2023 to pre-pandemic level of 3 percent of GDP in 2028.
