Government slashes growth target

By Prinz Magtulis (The Philippine Star), July 6, 2016

MANILA, Philippines – Growth targets and other macroeconomic assumptions were slashed yesterday as the new administration opted to be “conservative” despite planned aggressive spending focused on infrastructure.

Gross domestic product (GDP), the sum of all products and services created, is targeted to rise between six and seven percent this year and 6.5 and 7.5 percent next year.

The revised targets were lower than the original targets of 6.8 to 7.8 percent for 2016 and 6.6 to 7.6 percent in 2017.

From 2018 to 2022, seven- to eight-percent targets were set.

“We prefer to be conservative in terms of achieving growth rates,” Socioeconomic Planning Secretary Ernesto Pernia told reporters after a meeting of economic managers.

Budget Secretary Benjamin Diokno, chair of the interagency Development Budget Coordination Committee (DBCC), said growth would slow down this year because of low farm output.

Despite this, DBCC said targets were set considering the “boost” on infrastructure spending eyed through a wider budget deficit of 2.5 percent this year and three percent from 2017 to 2022.

This is expected to cushion the country against external headwinds, coming from a slowdown in Chinese economy and the exit of the UK from the European Union.

“We are also mindful of the risks…We are closely monitoring that,” Diokno said in a briefing.

Economic managers met officially for the first time yesterday to review goals set by the previous administration, which they earlier claimed to have been too high.

Aside from growth, trade projections were also slashed although the economy is still expected to retain a surplus of dollars during the entire administration of President Duterte.

Based on DBCC figures, exports and imports targets were slashed to three and seven percent this year from the original five and 10 percent, respectively.

For 2017, they were cut to six and 10 percent and eight and 11 percent in 2018. Preliminary goals of 10 and 12 percent for 2019 and 2020, and 11 and 13 percent from 2021 to 2022 were also set.

“We still expect the BOP (balance of payments) and current account to remain in surplus despite the challenging external conditions,” central bank Deputy Governor Diwa Guinigundo said.

As a result, the peso could still trade between 45 and 48 to a dollar.

Locally, Diokno said spending will be concentrated on infrastructure, which will initially get 5.2 percent of GDP next year. The budget for 2017 was pegged at P3.3 trillion.

For revenues, Diokno said the Bureaus of Internal Revenue and Customs would miss their targets this year.

Finance Secretary Carlos Dominguez, however, assured measures will be passed to boost collections, adding that 80 percent of the borrowings will remain locally sourced.

“The tax package that we will submit will be a mix. We are going to re-adjust the tax tables to reflect inflation. We are also looking at re-adjustment of excise taxes in fuel products,” Dominguez said.

“We will also be reviewing the exemptions on VAT (value-added tax) to broaden the tax base,” he added.