The interagency Development Budget Coordination Committee on Wednesday downgraded the 2019 growth target to a range of 6 percent to 7 percent from the previous estimate of 7 percent to 8 percent, because of the delay in the approval of the national budget and external risks including the lingering trade war between the US and China.
It also reduced the 2020 growth target to a range of 6.5 percent to 7.5 percent from 7 percent to 8 percent, but retained the target for 2021 to 2022 to a band of 7 percent to 8 percent.
Economic Planning Secretary Ernesto Pernia said in a briefing late Wednesday afternoon the DBCC factored in the delay in the approval of the national budget, assuming the delay would last until April this year.
“We also considered the onset of El Niño phenomenon, although we expect a mild one,” Pernia said.
Finance Secretary Carlos Dominguez III said the DBCC also considered the continuing trade war between the US and China.
“Trade wars between our trading partners will impact our own grown possibilities,” Dominguez said.
Dominguez said the budget impasse would affect the creation of more jobs that could possibly emanate from the infrastructure projects. He said this would affect the people in general.
“We don’t get to spend what we planned to. The early part of the year is the best period to do the construction of these projects. The delay in budget approval will delay the infrastructure program,” Dominguez said.
Economic managers urged Congress to transmit the 2019 national budget soon so that the government could sustain its investments on development priorities.
“The longer the budget impasse lasts, the larger the adverse effect to the economy and its people,” they said.
The National Economic and Development Authority said a reenacted budget for the entire year could pull down economic growth to 4.2 percent, the slowest since 2011.
Neda estimates showed that a reenacted budget until April 2019 would bring down full-year GDP growth to 6.1 percent to 6.3 percent.
“On the other hand, if the budget is passed in August, expect growth to be around only 4.9 to 5.1 percent. Worse, with a full-year reenacted budget, growth can go as low as 4.2 to 4.9 percent,” Pernia said in a statement.
The Philippine economy grew 6.2 percent in 2018, slower than 6.7 percent in 2017 and 6.9 percent in 2016, as higher inflation rate dampened consumer spending last year.
Inflation peaked at a nine-year high of 6.7 percent in October 2018, driven by higher prices of oil and food products and averaged 5.2 percent in 2018.
The DBCC retained the inflation assumption at 3 percent to 4 percent in 2019 and 2 percent to 4 percent from 2020 to 2022.
The peso-dollar exchange rate assumption was kept at P52 to P55 against the greenback from 2019 to 2022.
Assumptions in exports growth were maintained at 6 percent from 2019 to 2022, while imports projections were retained at 9 percent in 2019 and 8 percent from 2020 to 2022.
Revenue collections are seen to reach P3.15 trillion this year, or equivalent to 16.2 percent of the gross domestic product. Disbursements are targeted to hit P3.78 trillion in 2019, assuming the national budget is reenacted for the first quarter. The target is equivalent to 19.4 percent of GDP.
The nominal budget deficit target is programmed at P631.5 billion in 2019, representing 3.2 percent of GDP.