DBCC cuts growth target for 2018

October 16, 2018

President Rodrigo Duterte's economic team slashed on Tuesday the growth target for this year to reflect developments at the national and global level. Emerging from the 174th meeting of the Development Budget Coordination Committee at the Department of Finance, Budget Secretary Benjamin Diokno, chair of the DBCC, said gross domestic product growth target range has been lowered to 6.5-6.9 percent from 7.0-8.0 percent for 2018. The country's GDP for the first half averaged at 6.3 percent. For 2019 up to 2022 when Duterte's term ends, the DBCC has retained its economic expansion of 7.0-8.0 percent. "We remain optimistic but also we have tempered our optimism," said Socioeconomic Planning Secretary Ernesto Pernia in a joint press conference in Pasay City. The economic managers also adjusted upward inflation forecasts to 4.8-5.2 percent and 3.0-4.0 percent in 2018 and 2019, respectively. The DBCC's original inflation targets were 2.0-4.0 percent from 2018 until 2022. Diokno said the inflation forecasts from 2020 to 2022 have been retained at 2.0-4.0 percent, "consistent with the government's assessment that inflation will go back to the target level by next year." Inflation in September peaked at 6.7 percent, highest in nine years. Finance Secretary Carlos Dominguez III said the increase in inflation was also due to the uncertainty in the world economic picture. He noted that six months ago, the trade war between the United States and China was only a rumor, which is a reality now. "We are confident that the Philippine economy will weather storms abroad, but we're not complacent. We are taking very deliberate action to address the issue that we are facing," Dominguez said. For the government's target deficit to GDP, it is set at 3 percent in 2018, amounting to P526.8 billion in nominal terms. "The deficit will then be expanded to 3.2 percent of GDP for next year, reaching P624.4 billion, in order to fund key priorities of the government, particularly infrastructure and investments in human capital development. The deficit target will then be brought back to 3.0 percent of GDP in 2020 until 2022," Diokno said. The DBCC has also adjusted other macroeconomic assumptions. For the price of Dubai crude oil per barrel, the economic team said it is expected to average $70-75 for this year and is expected to further increase to $75-85 per barrel in 2019. In 2020, this range is forecasted to drop to $7-80 and as low as $65-75 for 2021 and 2022. For the Philippine-US dollar exchange rate, DBCC said it is likely to average P52.5-53 against the US dollar, up from P50-53 for 2018 with the range adjusting to P52-55 for 2019 until 2022, up from P50-53 per US dollar. The assumptions for the 364-day Treasury bill rate and the 6-month London Inter-bank Offered Rate have been altered also, the economic managers said. The average T-bill rate will range from 4.4-4.6 percent in 2018, up from 3.0-4.5 percent; in 2019-2022 the average T-bill rate is projected to range from 4.5-5.5 percent, up from 3.0-4.5 percent. Celerina Monte/DMS