Growth target faces cut; inflation kept

MANILA, Philippines - The Development Budget Coordinating Committee, or DBCC, is set to reduce the lower end of its gross domestic product (GDP) growth forecast to 6%- 6.7%, compared to the existing 6.1%-6.7%; as various global developments impact on the local economy. The DBCC technical working group’s revised assumptions will be presented for Cabinet approval within the month, said a ranking committee official who asked not to be named. The same official said the DBCC is also looking at Dubai crude prices to range from $88-$98 per barrel from an existing assumption of $62/barrel, despite averaging $103.18/barrel last month and $104.92 from last May 1-2. The local currency is also expected to range from P40-P43 to the US dollar, against a previous assumption of the peso trading from P42-P45 against the green-back. But the DBCC will likely keep its inflation rate projection at 4%-5%, as well as import and export growth rates at 8% and 9%, respectively. Despite changes in economic assumptions for the year, the Finance department expects no impact on the government’s fiscal performance, said one ranking Finance official in a separate interview. Hence, he said, the government is still aiming for a balanced budget this year. "There is no fiscal impact," said Finance Undersecretary Gil S. Beltran, when asked for a reaction on DBCC’s plans to change assumptions for the year. Mr. Beltran explained that while GDP growth is expected to slow down, the continuing rise in the prices of basic goods — but within projected ranges — should "more than offset" any impact on the collections of the Bureau of Internal Revenue (BIR). The tax agency, which usually accounts for nearly 80% of total state revenues, has been tasked to collect P845 billion this year. On the other hand, the Bureau of Customs is expected to book higher tariffs and duties with the anticipated rise of imported oil, which in turn should offset the impact of a strong peso. Customs collections for the year are expected to reach P255 billion. Mr. Beltran said that Finance Secretary Margarito B. Teves has decided to keep the BIR and BoC’s targets in the meantime. Mr. Teves is currently in Madrid, Spain, for a meeting with finance ministers of other Southeast Asian countries. — A. B. L. Lorenzo, BusinessWorld