DBCC revises growth targets for 2024-2025; sees lower budget deficit

By Ruth Abbey Gita-Carlos

April 4, 2024, 1:41 pm

<p><em>(File photo)</em></p>

(File photo)

MANILA – The Development Budget Coordination Committee (DBCC) has adjusted its economic growth targets for 2024 and 2025 due to current domestic and global developments.

The DBCC revised downward its gross domestic product (GDP) outlook for 2024 to 6 to 7 percent from the previous range of 6.5 to 7.5 percent, Socioeconomic Planning Secretary Arsenio Balisacan said in a Palace press briefing on Thursday.

For 2025, the DBCC narrowed the GDP target to 6.5 to 7.5 percent from the previous 6.5 to 8 percent.

Balisacan said the growth projection of 6.5 to 8 percent for 2026 to 2028 was retained.

The revised targets growth targets were initially discussed during the DBCC’s 187th meeting on March 22.

The DBCC took into consideration the latest trade outlook of the Bangko Sentral ng Pilipinas (BSP) and the International Monetary Fund (IMF) amid global trade disruptions and geopolitical tensions.

President Ferdinand R. Marcos Jr. approved the latest GDP outlook when he presided over the 16th full Cabinet meeting at Malacañan Palace in Manila on Wednesday.

Balisacan said the Marcos administration remains steadfast in its commitment to sustaining the robust growth trajectory of the Philippine economy.

“Robust macroeconomic fundamentals will support this growth trajectory. These growth targets will sustain the country’s position as one of the fastest-growing emerging economies in the Asia Pacific region,” Balisacan said.

“The government's dedication transcends meeting statistical targets or numerical benchmarks. We direct our efforts toward realizing a strategic and compelling vision for our nation's prosperity even as we navigate a global economic landscape marked by various challenges within and without,” he added.

Balisacan also assured the public that the government is still on track to achieving the upper middle income status by 2025.

Opportunities and risks

Balisacan said the country’s economic team discussed the possible opportunities and risk to growth outlook, adding that it identified several domestic and external challenges that are “on the horizon.”

These include climate change and extreme natural disasters such as El Niño that would “continue to pose risks to food security and the stability of food prices,” he said.

“Additionally, risks related to inflation, such as potential adjustments in transport fares, wages, and service utility fees higher than expected, could dampen household consumption,” he said.

Balisacan also cited that global economic slowdown may weaken external demand, while increasing geopolitical and trade tensions could disrupt supply chains.

He added that general elections in major economies could lead to political shifts that may disrupt trade and investment.

“Despite the anticipated risks, we remain optimistic about the country's sustained growth momentum as we strive for better development outcomes. We aspire to position the Philippines as a frontrunner within our region and beyond—a beacon of inclusive progress and resilience,” Balisacan said.

He said the full implementation of economic liberalization, investment-related, and business-friendly reforms and initiatives would boost greater investor interest and activity in the Philippines.

He also expressed confidence that Marcos’ “aggressive” investment and trade promotion initiatives would help promote the Philippines as “a destination of choice for businesses.”

He added that the national government housing initiative Pambansang Pabahay Para sa Pilipino Program is expected to boost the mining, manufacturing, and real estate sectors.

He also said the higher growth forecast for the transport and digital sectors could improve the digital and physical connectivity infrastructure in the coming years.

Retained inflation outlook

Balisacan said inflation rate targets were retained at 2 to 4 percent for 2028, following the government's assessment of recent internal and external developments that impact the prices of major commodity groups.

“The inflation outlook considers the monetary policy actions the Bangko Sentral ng Pilipinas is undertaking and the non-monetary strategies and measures the government is implementing,” he said.

The DBCC said the government would ramp up the implementation of strategies under the Reduce Emerging Inflation Now (REIN) Plan to ensure that inflation remains within the target band.

Full-year average inflation rate for 2023 settled at 6 percent, as the country grappled with the second order effects of high commodity prices from geopolitical tensions, trade restrictions from major rice-exporting countries, and tight supply of key commodities.

Lower budget deficit

The DBCC is also expecting a lower budget deficit from 5.6 percent in 2024 to 3.7 percent by 2028, Balisacan said.

The decline was anticipated based on the revenue and spending outlook.

“The new deficit path—now projected to gradually decrease in a practical, sustainable, and strategically paced manner— aims to respond more directly to the country’s urgent needs,” the DBCC said.

“This will provide the necessary fiscal space to support the government’s spending plan to invest more heavily in infrastructure and human capital development and provide adequate and well-targeted social services,” it added.

The DBCC also projected that the debt-to-GDP ratio would fall from 60.2 percent in 2023 before settling at 55.9 percent in 2028, saying it is “well within the internationally accepted threshold of 70 percent, as recommended by the IMF.”

Higher revenues

The DBCC said revenues are expected to reach PHP4.27 trillion in 2024 and rise to PHP6.078 trillion by 2028.

In 2023, the country registered an increase of 7.9 percent in revenue collections, hitting PHP3.824 trillion and exceeding the government’s target by 2.6 percent.

The DBCC vowed to improve the government’s revenue performance over the medium term through enhanced tax administration reforms focused on modernizing and upgrading the efficiency of the Philippine tax system.

 This will be complemented by revenue reform measures that were recalibrated to further improve revenue mobilization and will ultimately be more attuned to the country’s fiscal requirements and current domestic developments.

Proposed 2025 budget

Balisacan said the DBCC also proposed a national budget of PHP6.2 trillion for 2025, higher than the PHP6.120 trillion it initially proposed in December 2023.

He said “high-impact and transformative” public infrastructure projects and essential social services, especially for the poor and vulnerable, would be given priority under the proposed budget spending for next year.

“The budget shall support the Marcos administration's Build Better More Program to stay on course and maintain infrastructure spending between 5 to 6 percent of GDP from 2024 through 2028,” (PNA)