RP growth target cut to 3.1% this year

MANILA, Philippines - Economic authorities are downscaling the country’s economic growth target for this year to as low as 3.1 percent as a result of shrinking exports.

Government sources disclosed yesterday that the National Economic Development Authority (NEDA) is preparing to make recommendations to the executive technical board of the Development Budget Coordination Committee (DBCC) today.

According to sources, NEDA is projecting a slower growth in the country’s gross domestic product (GDP) from the original projection of 3.7 percent to 3.1 percent.

The DBCC had approved a projected range of 3.7 percent to 4.4 percent last February. The official target is set under the Medium Term Development Plan and although the DBCC-approved range is actually a projection, officials use it as a de facto target.

The national budget is calibrated according to the projected economic growth and even monetary policy is broadly guided by the de facto economic growth target set by the DBCC.

The Bangko Sentral ng Pilipinas (BSP) has been unofficially pressing for the DBCC to lower the economic target since it would allow monetary officials more room to maneuver in supporting growth without stoking inflationary pressures.

Even when downscaled, however, NEDA’s growth target is better than the revised GDP growth projection made by multilateral lending agencies including World Bank (WB) with 1.9 percent, International Monetary Fund (IMF) with 2.25 percent and Asian Development Bank (ADB) with 2.5 percent.

Sources said the government is now projecting a bigger drop in exports and imports as well as a weaker foreign exchange rate amid the global recession. This means that there would be less fuel to support economic expansion.

Just last February, the DBCC scaled down the GDP growth target to a range of 3.7 percent to 4.4 percent instead of the revised 3.7 percent to 4.7 percent due to the full impact of the global economic meltdown that is expected to take its toll on exports and imports.

The revision, although minor, allowed economic managers to revise the budget deficit ceiling to P177.2 billion or 2.2 percent of GDP instead of the revised shortfall of P102 billion or 1.2 percent of GDP.

Government sources said exports are projected to decline by as much as 13 percent to 15 percent this year instead of the revised slowdown of between six percent and eight percent.

On the other hand, imports would shrink by 12 percent to 14 percent instead of eight percent to 10 percent due to production slowdown resulting to the less importation of capital equipment and raw materials.

Sources added that the continued weakening of the peso against the dollar has forced the BSP to revise its foreign exchange assumption to a range of P46 to P49 per $1 intead of the previous range of P45 to P48 per $1.

Finance Secretary Margarito Teves earlier explained that downward revisions to the projected GDP growth would result to changes in the fiscal targets due to lower tax take of the Bureau of Internal Revenue and the Bureau of Customs.

The government had already decided to abandon its commitment to balance the budget last year and even the original 2010 schedule due to adverse external developments.