DBCC to revise 2006 economic assumptions

The Development Budget and Coordinating Committee (DBCC) will be revising its 2006 macroeconomic assumptions this month as the Bangko Sentral ng Pilipinas (BSP) earlier revised its key assumptions including inflation.

The DBCC is scheduled to meet on the macroeconomic numbers to bring all official figures in sync with developments in world oil prices, the growth in dollar inflows and the continued appreciation of the peso against the US dollar.

Budget Undersecretary Laura Pascua said the DBCC assumptions have so far been kept where they were first set last year with the assumed peso-dollar exchange rate at P55 to P56 to the dollar.

"In our proposed 2006 budget, we have kept our original assumptions but we should be discussing some changes soon, depending on what the new BSP numbers will be," Pascua said.

Thus far, the BSP has indicated that the projected balance of payments (BOP) for 2006 could be higher than originally projected this year, saying that the country could easily surpass the $900-million target for the year.

The BSP said it expects overseas Filipino workers’ inflows as well as inflows from investments and exports to sustain the country’s international reserves which had put the balance of payments in its strongest position in recent years.

The balance of payments represents what is left of the country’s international reserves after netting the country’s transactions with the rest of the world. A surplus indicates that the BSP has enough international reserves to shield the peso against wild fluctuations.

The 2006 inflation target has also been revised from four -five percent to five-six percent considering the impact of historically-high oil prices and its effect on domestic prices.

The National Economic and Development Authority (NEDA) has also adjusted its growth projections for the agriculture, services and industry sectors.

NEDA Director General Augusto Santos said that in 2005, the agriculture sector has been the main economic drag and assessments had to be made to determine its impact on the 2006 performance.

However, Pascua said the DBCC is not likely to change the government’s fiscal targets, with the programmed deficit firmly at P125 billion even with the increase in the value-added tax rate from 10 percent to 12 percent this year.