THE Cabinet-level Development Budget Coor-dination Committee (DBCC) expects the economy to sink deeper by 8.5 percent to 9.5 percent this year amid protracted lockdown measures due to the Covid-19 pandemic.
This latest gross domestic product (GDP) projection is worse than its earlier forecast of 5.5-percent contraction.
“Despite a lower projection than what was initially adopted back in July 2020, further relaxation of restrictions, as we have improved our healt-hcare system capacity, will keep our economy on the right track toward full recovery,” the DBCC said in a joint statement.
Considering this, the economic managers are anticipating the GDP growth to be at 6.5 percent to 7.5 percent in 2021 and 8 percent to 10 percent in 2022.
“We have revised macroeconomic assumptions and targets to take into account recent positive developments that will help propel the Philippine economy to a strong recovery starting 2021,” DBCC said.
“These developments include our gradual recovery, the better-than-expected performance of the main revenue collection agencies, improvements in the employment situation compared to the peak of community quarantine restrictions, and the likely passage of key economic recovery bills,” it added.
The DBCC is also expecting “further improvement” in the GDP numbers for the fourth quarter. “As we carefully and proactively manage the risks, a strong economic recovery and solid growth remains within our reach,” it added.
As of end-September, the Philippine GDP slid by 10 percent on average after registering contraction in three consecutive quarters.
To boost economic recovery, the DBCC proposes a 2022 cash budget of P5.024 trillion, equivalent to 22.2 percent of GDP. It is also higher by 11.5 percent than the 2021 national expenditure program.
“The proposed 2022 national budget will continue to prioritize funding for health-related responses and measures that will help accelerate economic growth,” the economic managers said.
Narrower budget deficit
DBCC trimmed its forecast for budget deficit this year to 7.6 percent of GDP from 9.6 percent of GDP. In 2021 and 2022, the deficit is estimated at 8.9 percent of GDP and 7.3 percent of GDP, respectively.
“Our deficit program is designed to balance the requirement of supporting economic recovery while keeping our debt-to-GDP ratio beneath a sustainable threshold,” the joint statement read.
The economic managers expect to collect more state revenues this year, or P2.85 trillion from the old estimate of P2.52 trillion. The new figure is equivalent to 15.7 percent of GDP.
For 2021 and 2022, revenue projections were revised upward to P2.88 trillion and P3.31 trillion, respectively, despite factoring in the impact of the Senate’s version of the Corporate Recovery and Tax Incentives for Enterprises (CREATE).
CREATE cuts the corporate tax income (CIT) immediately to 25 percent from 30 percent upon effectivity; and subsequently reduces it further by 1 percentage point every year from 2023 to 2027 until it reaches 20 percent.
Meanwhile, disbursements this year are seen reaching P4.23 trillion, which is 23.3 percent of GDP and 11.5 percent higher than last year. The government is expected to spend P4.66 trillion for 2021 and P4.95 trillion for 2022, which are equivalent to 23.4 percent of GDP and 21.9 percent of GDP, respectively.
Slowdown in trading
Amid a slowdown in global trading, the economic managers maintained their forecast of a 16-percent drop for goods exports while adjusting the goods import growth to -20 percent from -18 percent earlier. However, goods export and import growth figures are anticipated to improve to 5 percent and 8 percent, respectively.
Meanwhile, service exports and imports this year are seen to drop by 21.4 percent and 19 percent, respectively.
In 2021, however, service exports are expected to grow by 6 percent while service imports are projected to rise by 7 percent. “This accounts for the gradual opening up of the domestic economy and increase in travel-related activities,” DBCC explained.
Other macroeconomic projections
For 2020, the average inflation rate is adjusted to a forecast ranging from 2.4 percent to 2.6 percent. DBCC earlier projected inflation to settle within 1.75 percent to 2.75 percent. Meanwhile, inflation assumption for 2021 and 2022 is maintained at 2 percent to 4 percent.
The projected price of crude oil per barrel for 2020 is adjusted at $40 to $42 from $35 to $45. For 2021 and 2022, prices are seen ranging from $35 to $50 per barrel.
The peso, meanwhile, is seen to settle within P48 to P50 against the greenback this year. The local currency may weaken in 2021 to 2022, with the economic managers projecting closing prices within P48 to P53. “We must continue to progressively reopen businesses and mass transportation as safely as possible to allow more Filipinos to return to work and for our people to once more enjoy life as they all justly deserve,” the DBCC concluded.