The Development Budget Coordinating Committee said the first quarter economic growth of 8.3 percent brings the country closer to its goal of achieving a whole-year growth of at least 7 percent although external risks are yet in the horizon.
The Philippine economy expanded by 8.3 percent during the first quarter of 2022, surpassing even the growth path before COVID-19, according to the Philippine Statistics Authority.
This strong recovery has moved the country closer to its goal of achieving at least 7 percent growth in 2022, said a statement from the Development Budget Coordinating Committee.
The DBCC reviews and approves the macroeconomic targets, revenue projections, borrowing level, aggregate budget level and expenditure priorities and recommend to the Cabinet and the President of the consolidated public sector financial position and the national government fiscal program.
But heightened external risks such as the Russia-Ukraine conflict, China’s slowdown, and monetary normalization in the United States, the full-year growth target was slightly revised from 7 - 9 percent to 7 - 8 percent for 2022. Meanwhile, real GDP growth was retained at 6 - 7 percent for 2023 to 2025 as the economy is expected to sustain its strong recovery in the medium term.
The DBCC said it remains strongly committed to exercise prudent macroeconomic and fiscal management in prioritizing expenditures that translate to the betterment of micro communities in the country.
This is reflected in the direction of the FY 2023 expenditure that prioritizes health, disaster risk management, social security, digital economy, local government support, and growth-inducing expenditures such as crucial and shovel-ready infrastructure projects. All these will bring us closer to achieving the United Nations’ Sustainable Development Goals (SDGs).
“Our economic progress in the past two years demonstrates that the government’s risk management approach has been effective. With the full implementation of Executive Order No. 166 adopting the 10-point policy agenda, we will be able to accelerate and sustain economic recovery from the COVID-19 pandemic,: the statement said.
As we transition to a new administration, we are confident that the country will not see an end to the enactment of more game-changing reforms. The DBCC stands ready to work closely with the economic managers of the incoming administration to achieve more sustainable and inclusive growth for the Filipino people.
Q1 growth was broad-based
Growth was broad-based and was driven by industry and services at 10.4 percent and 8.6 percent, respectively. Meanwhile, agriculture slightly improved by 0.2 percent as the sector was held back by the persistence of African swine fever and elevated prices of basic agricultural commodities, among others.
Shifting the entire country to alert level 1, increasing the vaccination rate, especially for seniors and children, and reopening all face-to-face classes are crucial to further strengthen domestic demand, cushion the impact of external events, and achieve our growth targets.
Macroeconomic Assumptions
The DBCC also approved the following revisions to the macroeconomic assumptions based on emerging data.
Macroeconomic assumptions
The average inflation rate assumption for 2022 was adjusted upwards and is projected to range from 3.7 to 4.7 percent, following the uptick in the price of food and energy due to ongoing geopolitical tensions from the Russia-Ukraine conflict and disrupted supply chains. Nevertheless, the DBCC maintained the inflation rate assumption at 2.0 to 4.0 percent for 2023 to 2025, consistent with the latest forecasts of other agencies and its deceleration over the medium-term.
Meanwhile, the assumption for the price of Dubai crude oil per barrel for this year was increased to USD 90 to 110 per barrel considering potential supply disruptions caused by the Russia-Ukraine conflict. Nonetheless, this is expected to decrease to USD 80 to 100 per barrel in 2023 and USD 70 to 90 per barrel in 2024 to 2025 as oil supply is expected to catch up over the medium term.
Medium-Term Fiscal Program
As economic activity is expected to continuously pick up over the medium-term, revenue projections were revised upward to P 3.633 trillion (15.3 percent of GDP) for 2023 and to P 4.063 trillion (15.6 percent of GDP) for 2024. Revenue collections for 2025 are also expected to increase further to P 4.549 trillion (16.1 percent of GDP).
Consistent with higher revenue projections, disbursements were also revised upwards to P 5.086 trillion (21.3 percent of GDP) and P 5.392 trillion (20.8 percent of GDP) for 2023 and 2024, respectively. Meanwhile, disbursements are projected to reach P 5.723 trillion (20.2 percent of GDP) for 2025.
Given the revised revenue and disbursement program, the DBCC maintained its target deficit at 6.1 percent of GDP for 2023, 5.1 percent of GDP for 2024, and projected the figure of 4.1 percent of GDP for 2025 as the government continues to adopt a fiscal consolidation strategy to lower the deficit back to pre-COVID-19 levels.
Following higher revenue collections for next year, the proposed FY 2023 national budget is pegged at P 5.268 trillion (22.1 percent of GDP).
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