The inter-agency Development Budget Coordination Committee on Monday maintained its 2023 gross domestic product growth forecast at 6 percent to 7 percent despite the headwinds associated with geopolitical tensions, higher interest rates and elevated inflation.
DBCC—composed of the secretaries of the Department of Budget and Management, Department of Finance and the National Economic and Development Authority—also expressed optimism that the high-growth performance would continue until 2028.
“With increased domestic demand along with better labor conditions, improved tourist turnout and resumption of face-to-face classes, the Philippine economy grew by 7.6 percent in 2022, outperforming the DBCC’s growth target of 6.5 to 7.5 percent. This high-growth performance is projected to continue until 2028, aligned with the Medium-Term Fiscal Framework,” the economic managers said in a joint statement.
“Thus, we maintained our growth targets at 6.0 to 7.0 percent for 2023 and 6.5 to 8.0 percent for 2024 to 2028 in consideration of the risks posed by geopolitical and trade tensions, possible global economic slowdown, as well as weather disturbances in the country,” they said.
The agency said that in line with the Philippine Development Plan 2023- 2028, the strategies of the government would focus on modernizing agriculture, expanding agri-business, encouraging private sector participation in infrastructure development, promoting digital transformation and enhancing the competitiveness of local industries, among others.
“By implementing the reforms and strategies already outlined in the PDP 2023-2028, Filipinos can expect a more robust Philippine economy with a single-digit poverty level,” they said.
DBCC raised the average inflation rate assumption for 2023 to 5.0 to 7.0 percent from the previous 2.5 percent to 4.5 percent amid the persisting high prices of food, energy and transport costs.
The Inter-Agency Committee on Inflation and Market Outlook said it is committed to pursuing an all-of-government approach to continuously implement immediate and medium-term strategies to alleviate inflation, ensure food and energy security and return to the target range of 2.0 to 4.0 percent between 2024 and 2028.
The assumption for the price of Dubai crude oil for 2023 was pegged atS$70 to $90 per barrel considering the global demand slowdown. The latest forecasts suggest that global crude oil prices would continue to decline in 2024 before stabilizing at $60 to $80 a barrel between 2025 and 2028.
It expects the peso-dollar exchange rate to be at 53 to 57 between 2023 and 2028. “This positive outturn is attributed to the BSP’s policy normalization measures, as well as expected inflows from improvements in tourism revenues and OFW remittances due to the reopening of the country’s economy,” they said.
Goods exports and imports growth projections for this year remain at 3.0 percent and 4.0 percent, respectively, following the trend in near-term global demand outlook and trade prospects. These are expected to stabilize at 6.0 percent and 8.0 percent, respectively, in the medium term.
Meanwhile, services exports are expected to perform better this year and next year following the recovery of the tourism sector and the continued resilience of the BPO sector. Services exports growth was adjusted upwards from 12.0 percent to 17.0 percent in 2023 and from 6.0 percent to 16.0 percent in 2024.
Services imports growth estimates were also increased from 8.0 percent to 11.0 percent in 2023 and from 8.0 percent to 10.0 percent in 2024. The trade assumptions reflect the gradual normalization of economic activity both globally and domestically.
Revenue projections in the medium term are expected to improve from P3.73 trillion in 2023 to P6.62 trillion in 2028, as the proposed tax revenue measures under the Medium Term Fiscal Framework such as the Package 4 or the Passive Income and Financial Intermediary Taxation Act, VAT on digital service providers and excise taxes on single-use plastics and pre-mixed alcohol are expected to be implemented starting 2024.
“Following the revised revenue and disbursement program, we will maintain our commitment to fiscal sustainability by adhering to the target deficit for the period 2023 to 2028, which shall progressively decline from 6.1 percent of GDP in 2023 to 3.0 percent of GDP in 2028,” they said.