THE Cabinet-level Development Budget Coordination Committee (DBCC) is now projecting a higher GDP growth rate of 8 to 9 percent for 2021 and a lower GDP growth rate of 6 to 7 percent for 2022.
According to several government officials interviewed by the BusinessMirror, the government’s economic managers are seeing that the economy would grow faster next year on the back of expected additional infrastructure investment for the year to stimulate the economy.
The DBCC’s new GDP growth projection for 2021 is higher than its earlier projection of 7.1 to 8.1 percent.
But its new GDP growth projection for 2022 is lower than its earlier projection of 7 to 8 percent during its special meeting on May 12.
Both Budget Secretary Wendel E. Avisado, who is DBCC chairman, and Finance Undersecretary and Chief Economist Gil Beltran confirmed to the BusinessMirror the revised GDP growth projections that underwent DBCC ad referendum approval.
Acting Budget Assistant Secretary Kim de Leon also confirmed the revisions to the BusinessMirror, noting that the increased infrastructure spending next year is expected to create additional jobs and pump prime the economy.
De Leon also said the DBCC ad referendum approval took place on May 27.
“DBCC adjusted levels in 2021 in view of the expected additional infrastructure investment in 2021 to pump prime the economy, which is also expected to create additional jobs,” De Leon said in a message.
Meanwhile, the GDP growth projection for 2022 was revised downward due to the base effect.
“The downward adjustment in 2022 was due to the base effects of the upward prospect for 2021,” he added.
Asked how much would be the expected additional infrastructure spending for 2021, Beltran said it is about P120 billion, “assuming that the DBCC ad ref was approved.”
“That’s why bounce back is rapid. BBB [Build, Build, Build] has a high multiplier because the projects had high rates of return,” he said, referring to the government’s massive infrastructure program.
For this year, Beltran said the DBCC is keeping its earlier projection that the economy would contract by 2 to 3.4 percent. This could be the country’s worst GDP growth rate since the country’s economy contracted by 6.9 percent in 1985 based on 2018 constant prices.
Given the increased spending and drop in revenue collections, the country’s budget deficit is seen to balloon to P1.56 trillion or 8.1 percent of GDP based on the macroeconomic assumptions approved by DBCC on May 12 in its special meeting.
Despite increased deficit spending, the national government’s deficit-to-GDP ratio will remain in the median of comparable countries in Southeast Asia and East Asia, among peers with similar credit ratings, and among other emerging-market economies, DBCC said. This, as long as the ratio does not exceed 9 percent.
Below this threshold, the DBCC said the debt-to-GDP ratio will be around 50 percent, far lower than the most recent peak of 71.6 percent in 2004.
In 2019 the government recorded a budget deficit of P660.2 billion or 3.55 percent of GDP, exceeding the administration’s target of 3.25 percent of GDP for the year. Last year, the country also enjoyed its lowest-recorded debt-to-GDP ratio of 39.6 percent of GDP.
A budget deficit occurs when expenditures exceed revenues, while debt-to-GDP ratio is used to gauge a country’s ability to pay off its debt.