14 Dec 2021 – Turning bullish, Duterte gov’t upgrades 2021 GDP target

by Ramon Royandoyan – Philstar.com, 14 Dec 2021

MANILA, Philippines (Update 1, 6:51 p.m.) — A faster-than-expected growth in the third quarter prompted the Duterte administration to hike its economic target for this year, which officials said would be feasible if vaccination further picks up and pandemic curbs become looser.

From the old forecast of 4-5% growth for this year, the inter-agency Development Budget Coordination Committee (DBCC) now expects the economy to expand at a range of 5-5.5%.

The target for 2022 was retained at 7-9%, when the economy is expected to return to its pre-pandemic level, the DBCC said. From 2023 to 2024, gross domestic product growth is pegged at 6-7%, unchanged from the previous DBCC meeting.

“As we continuously relax restrictions and increase mobility, economic performance is expected to accelerate further in the last quarter of the year,” the DBCC said.

GDP, or the sum of all goods and services created in an economy, grew 7.1% year-on-year in the third quarter despite the Delta variant onslaught, beating economists’ projections.

That said, the Philippines managed to prevent a return to recession despite tighter restrictions in August that crippled economic activity in Metro Manila, the center of business and commerce in the country. What made a big difference was the less strict curbs placed this year compared to 2020, when the economy sank to historic-low because lockdowns back then were at their tightest.

Finance Secretary Carlos Dominguez III last month said that economic managers expect the country to achieve Alert Level 1 by the “onset of the New Year.”

Under Alert Level 1, all businesses are allowed to operate at full-site capacity, but still subject to minimum public health standards. The alert level system replaced the previous alphabet soup of community quarantine classifications that Filipinos came to know at the onset of the pandemic.

“While the threat of new COVID-19 variants may persist in the short-term, we are now in a much stronger position to manage possible spikes in cases and safely reopen the economy to alert level 1 in January 2022,” the DBCC said.

Other targets

For 2021, the Duterte administration projects inflation to end up between 4.3-4.5%, higher than its 2-4% annual target. “This is mainly due to the optimistic demand outlook for oil as the global economy gradually rebounds in the medium-term,” the DBCC said.

Meanwhile, the foreign exchange rate is forecast to end the year at P49-50 against the greenback.

Exports of goods were expected to close the year growing 16% while the imports bill is projected to expand 30%, the DBCC reported.

At the same time, the Duterte administration expects revenues to speed past its target and hit P3.027 trillion this year, carried by improved economic activity and collection efforts. The DBCC forecast revenues would return to pre-pandemic levels at P3.034 trillion by 2022, P3.624 trillion in 2023, and P4.05 trillion in 2024.

Disbursements, on the other hand, is seen reaching P4.633 trillion in 2021, higher 9.6% on a yearly basis. This was still lower than the initially-programmed P4.74 trillion.

“This combination of higher-than-expected revenues and lower-than-expected disbursements, were a direct factor of implementation wherein its affected by the pandemic. Infrastructure agencies were worst hit,” said Tina Marie Canda, officer-in-charge of the budget department.

With the slower spending and improved revenues, the DBCC lowered its budget deficit limit to 8.2% of GDP this year. The Duterte administration expected this to move downward to 7.7% of GDP in 2022, 6.1% in 2023 and 5.1% of GDP by 2024.

The proposed 2023 cash-based budget is estimated at P5.24 trillion.