The inter-agency Development Budget Coordinating Committee on Tuesday reduced the 2021 growth forecast to a range of 6 percent to 7 percent from the previous estimate of 6.5 percent to 7.5 percent, taking into account the prolonged impact of the COVID-19 pandemic and the imposition of the latest rounds of community quarantines.
The DBCC is composed of the Department of Finance, Department of Budget and Management and the National Economic and Development Authority.
Budget Secretary Wendel Avisado said in an online press briefing the DBCC reviewed the macroeconomic assumptions and targets in light of the recent domestic and global developments, particularly the effect of the pandemic.
“For 2021, the emerging gross domestic product growth projection is slightly adjusted to 6.0 to 7.0 percent from 6.5 to 7.5 percent in view of the emergence of new COVID-19 variants and the reimposition of Enhanced Community Quarantine in the ‘National Capital Region Plus’ area during the second quarter of the year,” Avisado said.
“Further, GDP is projected to return to pre-COVID-19 levels by growing at 7.0 to 9.0 percent in 2022, and will continue to grow by 6.0 to 7.0 percent in 2023 and 2024. Our growth prospects and economic recovery will be underpinned by three interventions to arrest the spread of the virus and help the poor cope with the impact of the quarantines,” Avisado said.
He said the first intervention would be the intensified implementation of the prevent, detect, isolate, treat, and recover strategy and the full vaccination of the residents in areas with the highest risk such as the NCR Plus, Pampanga, Cebu City and Davao City.
Avisado said that by targeting these areas, COVID-19 transmission could be dramatically reduced throughout the country.
The second intervention is the reduction of the gap from detection to isolation of COVID-19 positive cases from 7 to 5 days, such as the use of digitally-assisted contact tracing. This could potentially reduce cases by around 51 percent, according to epidemiological models.
He said that under the third intervention, around P170 billion would be needed to fund supplemental social support for those hardest hit by the pandemic and support improved health protocols. A version of this proposal is being deliberated in the House of Representatives, and is contingent on raising additional savings and revenues to remain deficit neutral, he said.
The DBCC maintained the average inflation target for 2021 to 2024 at 2.0 to 4.0 percent. Meanwhile, the price of Dubai crude oil per barrel was estimated to increase to $50 to $70 per barrel over the medium-term following the rise in global demand coupled with production cuts.
The peso-dollar exchange rate assumption was also adjusted to P48 to 53 against the greenback for 2021 to 2024.
In line with recent positive trends in global trade, goods exports are projected to expand to 8.0 percent in 2021 and 6.0 percent by 2022. Goods imports are also projected to grow by 12.0 percent this year and 10.0 percent in 2022 as domestic demand bounces back. For 2023 to 2024, goods exports and imports are projected to grow by 6.0 percent and 8.0 percent, respectively.
The growth forecast for services exports is maintained at 6.0 percent for 2021 to 2024. Services imports are projected to grow by 7.0 percent in 2021 and 8.0 percent for 2022 to 2024.
Revenues are maintained at the DBCC approved levels in December 2020 at P2.88 trillion for 2021 and increased to P3.29 trillion for 2022.
Meanwhile, as economic activities are expected to pick up over the medium-term, revenue collections are pegged at P3.59 trillion and P4.0 trillion for 2023 and 2024, respectively.
Estimated disbursements for this year were adjusted upwards from P4.66 trillion to P4.74 trillion, owing to funding requirements to support Bayanihan II, including the procurement of COVID-19 vaccines.
Disbursements are projected to reach P4.95 trillion in 2022 and will further increase to P5.11 trillion in 2023 and P5.40 trillion in 2024.
The estimated disbursements for 2022 to 2024 already take into account the proposed Growth Equity Fund which will be established in line with the implementation of the Supreme Court Ruling on the Mandanas-Garcia case.
The GEF aims to assist poorer local government units in addressing the problems of marginalization, unequal development, and high poverty incidence.
Given the revised revenue and disbursement program, the deficit program is adjusted upwards to 9.4 percent of GDP and 7.7 percent of GDP for 2021 and 2022, respectively.
The DBCC said it would 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 effects of the COVID-19 pandemic may remain in the short-term, but we are optimistic that the economy will return to its upward growth trajectory starting this year. This can be achieved through the accelerated implementation of the country’s recovery package and rollout of the national vaccination deployment to cover a broader segment of the population,” the DBCC said.
“We will continue to manage risks and push for the gradual and safe reopening of the economy after addressing the present spike so that people can return to work and the government can address hunger and poverty, while maintaining the strict compliance to minimum public health standards,” the council said.