Government may revise this year’s targets

With a weakening economy and an anticipated economic fallout resulting from the current war against terrorism, the government may take another look at its growth projections for the year.

If the third quarter performance is below target, we might consider revising our (macroeconomic) targets," said Development and Budget Management (DBM) Secretary Emilia Boncodin.

Boncodin said the country’s macroeconomic targets may need to be adjusted especially if exports, which make up more than 50 percent of the country’s gross domestic product (GDP), contract by more than 15 percent.

As this developed, sources at the finance department said there is a likelihood government will not be able to hold on to its programmed budget deficit of P145 billion this year.

The department has yet to release its revenues and expenditures figures for October, but unofficial data indicate that for last month, government exceeded its programmed deficit of about P12.6 billion.

As of end September, the deficit had reached P122.152 billion, raising fears of a runaway budget deficit, just like last year when the total deficit reached P136.1 billion, more than double the programmed P60 billion.

Boncodin said the interagency Development and Budget Coordinating Council is meeting shortly to assess the country’s targets in the wake of recent global economic and political events that are effecting most markets.

In the last DBCC meeting in October attended by representatives of the National Economic and Development Authority, the Department of Finance, Department of Budget and Management and the Department of Trade and Industry, the macroeconomic targets were maintained.

Maintained during the DBCC meeting were the growth projection of 3.3 to 3.8 percent for gross domestic product (GDP), 3.8 to 4.3 percent gross national product or GNP, and the fiscal program that pegged this year’s budget deficit to P145 billion.

The DBCC also maintained its foreign exchange forecast at P50-P51 o the US dollar by yearend while Treasury bills were seen average 10-11 percent.

On the downside, exports are now expected to drop by 15 percent instead of 10 percent, while imports are seen to decline by three percent.

Exports will suffer another cut because of the further weakening of the US economy, making its anticipated economic recovery longer than expected.

On the other hand, some of the country’s exports have imported contents or raw materials, thus, imports growth target was also scaled down.

The IMF has downsealed its growth projection for the Philippines to 2.5 percent, from three percent, as the global economy continues to slow down.

IMF managing director for the Philippines Sean Nolan said prospects for growth in the Philippines along with emerging markets in Asia were downgraded as industrial production and exports slowed down sharply because of the global slowdown, especially with the weakening of the technology sector in major export markets such as the US and Japan.

Of particular concern to the IMF is the Philippines’ growing budget deficit over the year and which this year is targeted at P145 billion.

The IMF said the government and even the Bangko Sentral ng Pilipinas (BSP)’s ability to stimulate the economy through pump-priming has been weakened considerably by a sizeable fiscal deficit.