The Development Budget Coordination Committee (DBCC) on Monday reduced this year’s economic growth target to a range of 6-6.5%, but widened the range for the period 2025 to 2028 to 6-8%, due to “ the evolving domestic and global uncertainties. ”
Budget Secretary Amenah F. Pangandaman, chairman of the DBCC, said the Philippine gross domestic product (GDP) is expected to grow 6-6.5% this year, smaller than the previous target of 6-7%.
“Despite the domestic challenges, we are optimistic that we can still achieve our growth target of 6% to 6.5% for this year. “In particular, we expect the Philippine economy to recover in the final quarter given expected increases in holiday spending, ongoing disaster recovery efforts, low inflation and a robust labor market,” she said on Monday during a briefing after a DBCC meeting. afternoon.
The DBCC’s review of macroeconomic assumptions came after the Philippine economy grew at a weaker-than-expected 5.2% in the third quarter, the slowest since 4.3% in the second quarter of 2023.
In the first nine months, GDP growth averaged 5.8%. To meet the lower end of the government’s revised target of 6-6.5%, the economy would need to grow 6.5% in the fourth quarter.
Finance Secretary Ralph G. Recto said the Philippine economy can still “realistically” grow 6% year-round.
“Growth assumptions for 2025 to 2028 have been widened from 6% to 8%, reflecting the expected impact of structural reforms and evolving domestic and global uncertainties,” Ms. Pangandaman said.
To achieve the goals, she said the government is committed to “accelerating infrastructure investment, increasing ease of doing business and boosting national competitiveness.”
The DBCC Chairman said they expect the recently signed Republic Act No. 12066 of Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Revitorating the Economy (CREATE MORE) Act to stimulate faster growth and attract more foreign investment.
TAX program
“We have maintained our medium-term budget targets for 2025 to 2028. This means that we remain committed to reducing the country’s deficit in a more gradual and realistic manner, while also encouraging long-term investments that create more jobs, increase incomes and reduce poverty incidence,” said Ms. Pangandaman.
The DBCC said it has raised the 2024 deficit ceiling to -5.7% of GDP from -5.6% previously. The deficit ceiling was maintained at -5.3% of GDP for 2025, -4.7% for 2026, -4.1% for 2027 and -3.7% for 2028.
For this year, the DBCC has raised its revenue outlook to P4.383 trillion in 2024 from P4.27 trillion previously. Revenue targets were maintained at P4.644 trillion for 2025, P5.063 trillion for 2026, P5.627 trillion for 2027 and P6.249 trillion for 2028.
“On average, revenue collections are expected to remain at 16.5% of GDP between 2025 and 2028, reaching $6.250 trillion (17% of GDP) by the end of the administration. This means that in the medium term, the government will collect an additional billion in revenue per day annually,” said Ms. Pangandaman.
She said this will be supported by new measures such as value added tax (VAT) on digital services and tax administration reforms aimed at digitalisation.
At the same time, Ms. Pangandaman said government spending will remain one of the key contributors to growth.
The spending program for this year was increased from 5.754 trillion euros previously to 5.907 trillion euros.
DBCC expects expenditure to average around 21% of GDP between 2024 and 2028.
The 2025 spending target was maintained at €6.182 trillion; 2026 was set at P6.54 trillion, 2027 at P7.027 trillion and for 2028 at P7.621 trillion.
“Our fiscal discipline and flexible debt management have recently earned our country a regional rating of stable to positive by S&P Global and a series of high rating affirmations from several global credit rating agencies,” Ms. Pangandaman said.
REVISIONS
During its meeting, the DBCC also adjusted macroeconomic assumptions for inflation, crude oil, exchange rates and export growth.
Inflation is expected to average 3.1-3.3% this year, a narrower range than the previous assumption of 3-4%. For the period 2025 to 2028, the inflation assumption is kept at 2-4%.
Dubai’s crude oil price assumption was lowered to $78-$81 per barrel this year, from $70-$85 per barrel previously. Crude oil price assumptions were lowered from $65-$85 per barrel to $60-$80 per barrel for 2025 to 2028, “with expected improvements in global oil production over the medium term,” the DBCC said.
The DBCC sees the Philippine peso averaging P57-P57.50 against the U.S. dollar this year, “given continued growth in remittances, recovery in travel services and growing outsourcing revenues.”
The peso is expected to “broadly stabilize” at P56-P58 per dollar in 2025, and at P55-P58 per dollar from 2026 to 2028.
Based on foreign trade assumptions, the DBCC has lowered this year’s goods export growth to 4% from 5% previously, “in line with the observed slowdown in export earnings in recent months and with the revision of the prospects for the domestic semiconductor industry.”
From 2025 to 2028, export growth was maintained at 6%.
DBCC maintained its assumptions for import growth this year at 2%, 5% for 2025 and 8% for 2026-2028. — ARAInosante