The government’s economic managers on Friday disclosed a six-year economic plan that aims to reduce the budget deficit, bring down poverty incidence, promote fiscal sustainability and enable a robust gross domestic product growth of up to 8 percent annually.
The interagency Development Budget Coordinating Committee adjusted the 2022 GDP growth projection to a range of 6.5 percent to 7.5 percent from 7 percent to 8 percent previously, but raised the target to 6.5 percent to 8.0 percent from 2023 to 2028.
Finance Secretary Benjamin Diokno said in a statement the economic team also submitted the first medium-term fiscal framework to President Ferdinand Marcos Jr. He said the Department of Finance would implement the fiscal strategy in two stages over the entire term of the administration.
“This framework will set the tone or will be our game plan for the next six years. This is the first time that this government or any government of the Philippines has presented such a game plan,” Diokno, who heads the economic team, said.
He said the MTFF demonstrates the government’s holistic approach in accelerating economic growth and promoting the welfare of Filipinos. The MTFF will also serve as the government’s guidebook in reducing poverty incidence and lowering the country’s debt-to-GDP ratio.
It aims to elevate the country to upper middle-income status, where per capita income for Filipinos would reach $4,046 by the end of the President’s term, Diokno said.
“We are not only concerned with growth per se, but we are also concerned with reducing poverty. So, our target is that by the end of President Marcos’ term, poverty incidence will be down to a single digit – nine percent,” Diokno said.
The MTFF’s overall goal is to create more quality jobs and reduce poverty incidence by steering the economy back to its high-growth path in the near term and sustain the high but inclusive and resilient growth over the medium term.
The DBCC said the increase in household consumption and private investments, along with a robust manufacturing industry, high vaccination rate, improved healthcare capacity and the upward trend on tourism and employment allowed the government to safely re-open the economy and register a positive growth in the first three months.
“This momentum is expected to continue for the rest of the year, with the GDP growth assumption slightly adjusted to 6.5 percent to 7.5 percent in consideration of recent external and domestic developments. This growth will be sustained and expanded to 6.5 to 8.0 percent in FY 2023 to 2028,” the DBCC said.
DBCC is composed of the heads of the Department of Finance, Department of Budget and Management and the National Economic and Development Authority, with an observer or representative from the Bangko Sentral ng Pilipinas.
NEDA director-general Arsenior Balisacan downplayed any significant impact to growth from the feared recession in the US and Chinese economies, saying the domestic economy sources its strength from domestic consumption.
“The negative implication [of the US and Chinese recession] could be lower demand for our exports. But our sources of growth is domestic consumption and investments… which are huge chunks of our GDP growth,” Balisacan said.
The DBCC said the average inflation rate assumption for 2022 remained elevated and is projected to range from 4.5 to 5.5 percent, following the uptick in prices of fuel and food as a result of the ongoing Russia-Ukraine conflict and disrupted supply chains. It was slightly adjusted to 2.5 percent to 4.5 percent for 2023, and is expected to return to the target range of 2.0 percent to 4.0 percent by 2024 until 2028.
Meanwhile, the assumption for the price of Dubai crude oil was set at $70 to $90 per barrel for 2024 to 2028, as oil supply is expected to catch up and stabilize over the medium-term.
The peso-dollar exchange rate assumption for 2023 to 2028 is seen at P51 to P55 on heightened global uncertainty such as the aggressive monetary policy tightening by the US Fed, market aversion amid Russia-Ukraine conflict and increased global oil prices.
Imports growth is forecast at 8.0 percent for 2024 to 2028, while the goods exports growth is projected at 6.0 percent for 2023 to 2028.
Revenue collections are projected to show a gradual, upward trend over the medium-term from P3.633 trillion (15.3 percent of GDP) in 2023 to P6.589 trillion (17.6 percent of GDP) in 2028. This will be achieved through the continued implementation of existing tax policy and tax administration reforms, bolstered by a robust economic growth.
Meanwhile, disbursements for 2022 to 2023 will be maintained above 20 percent of GDP at P4.955 trillion and P5.086 trillion, respectively, to ensure continuous implementation of priority programs on infrastructure and socio-economic development.
Disbursement will further increase over the medium-term from P5.402 trillion (20.7 percent of GDP) in 2024 to P7.712 trillion (20.6 percent of GDP) in 2028.
The DBCC said given the revised revenue and disbursement program, the deficit would be gradually reduced by at least 1.0 percent every year starting at 6.1 percent of GDP in 2023 to 3.0 percent of GDP by 2028 to ensure debt sustainability over the medium-term.
It said this would be achieved through improved spending efficiency and alignment of budget priorities that are anchored on the administration’s two 8-point socio-economic agendas, one for the near-term and another for the medium-term.
The government is also targeting an infrastructure spending-to-GDP ratio of 5.0 to 6.0 percent annually between 2023 to 2028 and a 9.0 percent poverty rate by 2028. The targets will be anchored on the implementation of coherent strategies, policy discipline and fiscal sustainability.
Diokno said the MTFF contains near-term and medium-term strategic plans for socioeconomic development, which would be presented in detail to the public by Marcos in his first State-of-the- Nation Address.
The Duterte administration brought poverty incidence down from 23.5 percent in 2015 to 16.7 percent before the pandemic hit the economy.
Data showed that between the first semester of 2018 and the first semester of 2021, poverty incidence rose to 23.7 percent. The Marcos administration targets to bring the rate lower to 9 percent of the population.
Diokno is confident that government revenues would continue to pick up and the deficit would decrease in the near term. “The desire is to reduce the deficit which ballooned during the pandemic to around 9 percent deficit-to-GDP ratio to around three percent,” he said.
The government also plans to cut the debt-to-GDP ratio from 63.5 percent as of the first quarter of 2022 to 60 percent by 2025.
Diokno said Marcos wanted all industries to perform well. He said in an interview over a public affairs program President Marcos wanted the agriculture sector to catch up to reduce the country’s reliance on imports.
The government will continue importation in the meantime until domestic production increases, Diokno said. Diokno also sees the mining industry as a growth sector, especially with the uptrend in metal prices. The government also plans to continue spending for key infrastructure projects.
“On the Build, Build, Build Program, we are committed to spend some 5 percent to 6 percent of GDP for infrastructure annually between 2023 and 2028,” he said.