The interagency Development Budget Coordinating Committee on Tuesday lowered the 2018 gross domestic product growth target to a range of 6.5 percent to 6.9 percent from the previous estimate of 7 percent to 8 percent, amid the global economic challenges, high oil prices, and faster inflation rate.
Budget Secretary Benjamin Diokno said in a news briefing after the DBCC meeting at the Bangko Sentral ng Pilipinas that the 2019 GDP growth target of percent 7 to 8 percent was untouched.
The DBCC is composed of the secretaries of the departments of Finance, Budget, National Economic and Development Authority, and Bangko Sentral.
The economy grew 6.3 percent in the first half, below the original target range of 7 percent to 8 percent, pulled down by sluggish agricultural output, faster inflation, trade imbalance and the closure of the resort island of Boracay and some mining companies.
Economic Planning Secretary Ernesto Pernia said the government remained optimistic on the growth prospects for the economy.
“We remain optimistic but with temper optimism and prudence. Maybe we can still achieve 6.9 percent growth this year with lots of prayers,” Pernia, who is also the director-general of the National Economic and Development Authority, said.
“We grew by 6.3 percent in the first six months… we still have another six months’ balance to attain that,” Pernia said.
Finance Secretary Carlos Dominguez III said “we are living in a different world now”, as he cited the heating trade war between the US and China, increasing oil prices and the expected continuous policy normalization in the US.
“I think our latest estimates reflect these things,” Dominguez said.
“We are confident the Philippine economy will weather these storms but we can’t be complacent. We are taking deliberate actions to address the issues we are facing,” he said.
Dominguez said despite the external and domestic headwinds, the economy was fortunate because it remained resilient enough, with strong banking sector and enough foreign reserves.
The DBCC also adjusted the peso exchange rate assumption this year to a range of 52.50 to 53 per US dollar from 50 to 53 per greenback earlier.
It revised upwards the inflation forecast this year to a range of 4.8 percent to 5.2 percent from the previous estimate of 4 percent to 4.5 percent. The forecast for 2019 was also adjusted upwards to 3 percent to 4 percent from the earlier assumption of 2 percent to 4 percent.
Inflation in the first nine months averaged 5 percent, above the Bangko Sentral’s target range of 2 percent to 4 percent.
Inflation in September accelerated to a nine-year high of 6.7 percent from 6.4 percent in August.
The Philippine Statistics Authority said the faster inflation was driven by faster increases in the prices of rice, meat, vegetables, fish and fuel.
Monetary Board member Felipe Medalla, said inflation might peak in October, and start to “go down starting November.”
Malacañang Palace announced over the weekend that President Rodrigo Duterte planned to suspend the second tranche of excise tax on fuel under the Tax Reform for Acceleration and Inclusion law in a bid to temper inflation. The move is expected to result in around P41-billion in lost revenues for the government.
Dominguez said Monday the DBCC might consider reducing the government’s spending on non-infrastructure projects as a result of the suspension of excise tax on fuel.
Diokno said a task force was created to look into what particular items would get reduced expenditures. He said the DBCC would observe “seniority” in expenditures, saying what might be affected were the purchase of cars and maintenance.
Diokno assured that infrastructure spending would be “exempted” from the spending cuts.