Gov’t revises ’06 economic targets

The Development Budget Coordinating Committee (DBCC) is revising its macro-economic numbers for 2006, including the economic growth projections.

This developed as the National Economic and Development Authority (NEDA) said it was preparing for major revisions in the Investment Priorities Plan (IPP) to shift government focus on education, health and environment.

Socio-economic planning Secretary Augusto Santos told reporters yesterday that the NEDA was revising its growth projections for 2005 and possibly 2006.

The government had projected the economy to grow by 5.7 percent to 6.3 percent in 2006 but the recent estimate made by the International Monetary Fund (IMF) was lower than the low-end of the projected range of five percent for the whole year.

According to Santos, the new macro-economic projections will be taken up by the DBCC in its succeeding meetings to factor in the developments in the global oil prices, foreign exchange rate and the record inflow from overseas Filipino workers.

Santos said included in the proposed revisions were the inflation projections of the Bangko Sentral ng Pilipinas (BSP) as well as the growth rates in the agriculture, services and industry sectors.

Santos said the macro-economic assumptions are likely to change although he declined to speculate on the magnitude of adjustments that would have to be made.

NEDA reported that the third quarter growth in gross domestic product (GDP) slowed down to 4.1 percent from 4.8 percent in the second quarter.

Santos said agriculture was the main economic drag stressing that its performance this year would likely impact 2006 performance especially with the lingering effect of external shocks in the poultry and livestock sector, specifically the avian flu scare.

On the other hand, Santos said the NEDA was expecting inflation to continue rising in November and December as consumer spending goes up for the annual holiday spree.

"Considering that we are seeing historic levels of OFW remittances, spending will be high this Christmas and that will jack up the inflation rate," he said.

According to Santos, the inflationary pressure created by increased dollar inflow would also spill-over to 2006 as the economy receives the boost in family income from overseas workers.

"The challenge here really is to lure OFW funds into investments instead of consumer spending and savings," he said.

Meanwhile, Santos said he was pushing for a major change in the government’s investment priorities plan that it uses as the framework for allocating incentives and perks to various industries based on maximum economic impact.

Santos said the shift in the IPP would make good use of the additional collections from the increase in the value added tax rate which was projected to reach at least P55 billion in 2006.

"It will be difficult to do this but who will argue against spending more on education, health, infrastructure and the environment?" he said. "These are long-term investments that we have to make now."