" The committee’s members had mostly positive things on their plate."
" The committee’s members had mostly positive things on their plate."
The DBCC (Development Budget Coordination Committee) is the core of NEDA (National Economic and Development Authority). This can be seen from its membership: the heads of DOF (Department of Finance), NEDA, DBM (Department of Budget and Management), DTI (Department of Trade and Industry), DPWH (Department of Public Works and Highways) and DTr (Department of Transportation).
As its name suggests, DBCC is essentially about the national budget—more specifically, releases of funds by the DBM to support government spending. It meets periodically to review trends in the economy and adjust the need for and pace of DBM money releases. It met last month to review the state of the economy, analyze economic trends and made adjustments to DBM operations.
During its most recent meeting, DBCC saw no need to revise its GDP (gross domestic product) growth targets for 2019, and the years 2020 to 2022—6 to 7 percent this year, 6.5 to 7.5 percent in 2020 and 7.8 percent in 2021 and 2022. But it saw a need to revise two key growth parameters.
One of these was the rate of inflation in 2019. DBCC expected a lower inflation rate this year due to—in the words of the acting DBM head—“the government’s decisive steps to stabilize the general price level.” These included, Janet Abuel said, “the full implementation of Presidential directives issued last year to increase the food supply.” DBCC now expects consumer price increases to stay within the 2.7 to 3.5 percent range; the previous target range was 3 to 4 percent. It maintained its 2 to 4 percent inflation rate forecast for 2020-2022.
The other GDP-computation parameter that DBCC adjusted was the exchange rate of the peso. It expects stronger peso in 2019 with “easing inflation pressures and a positive (international) market sentiment with the recent credit rating upgrade of the Philippines.” Accordingly, it adjusted its pesos-to-$1 target to 51-53 from 52-55. For 2020-2022 it now projects a pesos-to-$1 rate in the 51-55 range, down from 52-55. In April S&P Global Ratings raised its long-term credit rating for the Philippines to BBB+, which is two notches above minimum investment grade.
There was no need for DBCC to say much about the inflation rate because consumer prices clearly have stabilized since the end of 2018. But the same cannot be said about the external value of the peso. A stronger peso will, by making imports less expensive, contribute toward price stability, but, by making Philippine exports more expensive for foreign buyers, a stronger peso will reduce whatever competitiveness Philippine products still enjoy in foreign markets. Clearly, with a 2018 merchandise trade deficit of around $42 billion, a stronger peso is a double-edged sword for this country.
All in all, the DBCC members had mostly positive things on their plate during their recent meeting.