DBCC set to review macroeconomic assumptions
The development Budget Coordination Committee (DBCC) is expected to review its macroeconomic and fiscal program assumptions at its next meeting, taking into consideration government underspending and lower growth forecasts from multilateral lenders.
Finance Secretary Benjamin E. Diokno told reporters on Friday that the DBCC will see if growth targets need to be changed after the economic performance in the first semester.
In the first half, gross domestic product (GDP) growth averaged 5.3%, lower than the government’s 6-7% target.
“There are some changes from the Asian Development Bank (ADB) and World Bank, so we will review the growth targets, where we are on inflation, and then of course we will also review (government) underspending,” he said.
Multilateral agencies recently downgraded its Philippine growth projections after GDP grew by 4.3% in the second quarter, its slowest growth in over two years. The weaker-than-expected second-quarter expansion was partly driven by the 7.1% contraction in government spending.
The ADB recently lowered its Philippine growth outlook to 5.7% this year from 6% previously. The ASEAN+3 Macroeconomic Research Office (AMRO) also cut its GDP projection for the Philippines to 5.9% from 6.2% previously.
The World Bank is set to release its East Asia and Pacific Economic Update today (Oct. 2).
Asked if the DBCC will likely revise targets, Mr. Diokno said “there is always a chance, based on the most recent information.”
“Well, I think the general sentiment, at least based on my conversation with the World Bank, (is that) globally every country is being downgraded, but the good news is the Philippines will remain to be the fastest growing in this part of the world. We beat China, we beat Vietnam and Indonesia. Our growth is still faster,” he added.
The DBCC, which last met on June 9, is scheduled to hold another meeting before the end of the year.
Mr. Diokno also noted that a team from the International Monetary Fund (IMF) is conducting its Article IV Consultation mission for the Philippines since Sept. 21. A press briefing is scheduled on Oct. 3 (Tuesday).
The IMF earlier said it may revise its growth outlook for the Philippines, after slower-than-expected second-quarter GDP expansion.
The National Economic and Development Authority (NEDA) earlier said GDP has to expand by at least 6.6% in the second half to be able to meet the government’s 6-7% target.
Meanwhile, Mr. Diokno said the DBCC will also review its fiscal program since some key tax measures may not be approved by Congress in time for implementation in 2024.
“There are many measures that may not be passed this year, but there are some measures that will, so we will review (that). We do that every quarter,” he added.
For example, the Department of Finance’s (DoF) proposed junk food tax currently has no sponsor at the Senate and House of Representatives.
Mr. Diokno said he does not expect the junk food tax proposal to be passed this year.
“We will just rely on those bills that are likely to be passed. For example, single-use plastics (and) digital payment, that will go through,” he added.
In June, the DoF announced it was pushing for a tax on junk food and an increase on the tax on sweetened beverages. It earlier said that the combined measures could yield P76 billion in revenue in the first year of implementation.
Revenues from the junk food tax alone could generate around P20 billion, according to the department.
The government set its deficit ceiling at P1.499 trillion this year, equivalent to 6.1% of GDP. Its fiscal program this year is set at P3.729 trillion in revenues and P5.228 trillion in disbursements.
Source: Business World