Government keeps 2015 targets

MANILA, Philippines - The government’s economic team has retained the country’s official growth targets for this year but downscaled its forecast for 2016.

In a briefing yesterday, Budget Secretary Florencio Abad, who also serves as the head of the interagency Development Budget Coordination Committee (DBCC), said they deemed prudent to set the economic growth target at seven-eight percent until the end of President Aquino’s term in 2016.

With this move, the official GDP (gross domestic product) target for 2016 has been cut from the original forecast of 7.5-8.5 percent to take into account the uncertainties on the global front.

Despite the slowdown in the third quarter, Abad sees the local economy growing six to seven percent for the whole of 2014, driven by the country’s robust macroeconomic fundamentals and improving revenue collections.

Abad said strong consumer and business sentiment would boost consumption and investments this year and next year.

“While 2014 showed a lot of downside, we felt some of the issues would not be impacting heavily as they had in the past year. The domestic economic prospects continue to look good. We have to temper that with global developments such as the slowdown in China and Europe and strengthening of the dollar,” Abad said.

Abad said the government intends to keep the country’s budget deficit to two percent of GDP equivalent to P284 billion for this year.

The Aquino administration has also kept its foreign exchange rate outlook at 42 to 45 to the dollar for 2015 to 2018.

“The position of the central bank is the peso may weaken but may continue to be generally stable. Some of the assessments presented said depreciation could be triggered by capital outflows because of the anticipated US rate hike,” Abad said.

Abad said the government has vowed to ramp up spending during the last two years of President Aquino’s term as it makes a push for quality infrastructure to sustain the growth of the economy.

The government aims to hike infrastructure spending from 2.5 percent of GDP to five percent by 2016.

“Agencies should spend as they should. We won’t tolerate underspending. After the papal visit, there will be a meeting with the President with the aim of putting in place a mechanism to fasttrack spending,” he said.

Philippine economic growth slowed sharply in the third quarter due to weaker growth across all sectors. This is well below market expectations of a 6.6 percent rise and the slowest pace of growth since 2011.

Other drivers of faster economic growth are reelection-related spending as well as the higher government budget for infrastructure projects.