GDP targets cut over budget impasse

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Economic managers on Wednesday cut economic growth targets for 2019-20 due to the projected impact of the re-enacted budget this year.

In a briefing after the meeting of the inter-agency Development Budget Coordination Committee (DBCC), Department of Budget and Management (DBM) officer-in-charge Janet Abuel said, with this downward revision, gross domestic product (GDP) target for this year now stands at between six to seven percent, while the 2020 target is now at between 6.5 to 7.5 percent.

This represents a retreat from the original target for the same two-year period, which was a flat seven to eight percent growth.

The changes were made since Congress has yet to submit to the Office of the President a copy of the enrolled P3.757 trillion national budget which the Bicameral Committee approved last February.

Members of the House of Representatives reportedly admitted to have changed the ratified version of the budget, resulting in an impasse with the Senate.

To date, the government is operating on a re-enacted budget.

Abuel said economic managers have considered a -0.7 to -0.9 percentage points impact on domestic growth of the re-enacted budget until April this year.

If the government will run on a re-enacted budget until August, the impact on GDP is estimated between -1.4 to -1.9 percentage points while it is between -2.1 to -2.8 percentage points if on full year.

“We, therefore, urged Congress to transmit the 2019 national budget at the soonest possible time to the Malacanang so the government can sustain its investments on development priorities namely public infrastructure and social services,” Abuel said.

She stressed that “the longer the budget impasse lasts the larger the adverse effect to the Philippine economy and its people.”

“We remain confident of the sound macroeconomic fundamentals and the resilience of the Philippine economy. We assure the Filipino people that the economic managers will continue to monitor developments at home and overseas to secure the sustained growth and development of the country,” she added.

Relatively, Socio-Planning Secretary and National Economic Development Authority (NEDA) Director General Ernesto Pernia, during the same briefing at the Department of Finance (DOF), noted that impact of the mild dry spell is not expected to have a big dent on domestic growth.

“At the back of our minds there is this El Nino phenomenon. Although it is expected to be a mild and so it should not really matter that much,” he said.

Finance Secretary Carlos Dominguez III, during the same briefing, said unresolved trade issues between US and China, among others, “is a source of concern” vis-à-vis the growth of the domestic economy.

“We also know very, very well that any slowdown in growth of our trading partners will definitely negatively affect our own growth possibilities,” he added.

Relatively, DBCC’s latest revenue target for this year is P3.15 trillion, or about 16.9 percent of GDP.

This is lower than the previous target of P3.208 trillion, which Dominguez said was made after economic managers realized that the target is “too high” when compared to the actual 2018 revenues, which amounted to P2.85 trillion.

Inflation is still projected to average between three to four percent this year while the figures for the succeeding two years is between two to three percent, the lower end of the target band of two to four percent until 2022.

Dubai crude oil is seen to go down to $60-75 per barrel for 2019-22 from $75-$85 per barrel during the DBCC meeting in October 2018.

The peso is seen to average between 52-55 to a greenback from this year until 2022 and the one-year Treasury bill (T-bill) rate at 5.5-6.5 percent this year and five to six percent from 2020-22.

Exports of goods is seen to grow by six percent from this year until 2022 while imports by nine percent this year and eight percent from 2020-22.

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