Gov’t cuts economic growth forecast for 2023 to 6-7%

The Philippine government’s economic managers on Monday lowered the growth outlook for 2023, following a year of record-high inflation and the substantial weakening of the local currency.

The inter-agency Development Budget Coordination Committee (DBCC) cut the growth forecast for the country’s gross domestic product—which is used as a measure of the size and health of a country’s economy—to 6-7 percent, from the original 6.5-8 percent.

“This momentum is expected to slightly decelerate in 2023 and range from 6 to 7 percent considering external headwinds, such as the slowdown in major advanced economies,” the DBCC said in a statement.

The DBCC is comprised of the secretaries from the National Economic and Development Authority, Department of Finance, Department of Budget and Management, as well as the Bangko Sentral ng Pilipinas (BSP) governor.

“Nevertheless, growth is expected to pick up in 2024 to 2028 at 6.5 to 8.0 percent, as we push for government strategies and interventions of the Philippine Development Plan 2023-2028,” it added.

These measures include modernizing agriculture and agri-business, revitalizing the industry sector and reinvigorating the services sector.

Rising inflation, weaker peso

The DBCC is seeing higher inflation for this year, revising their estimates to 5.8 percent from the previous 4.5 percent to 5.5 percent owing to persistent high prices of food and transport costs.

The Philippines’ consumer price index climbed 7.7 percent back in October, a 14-year high, driven by price gains in key commodity groups like food and non-alcoholic beverages.

The central bank sees the November inflation within the 7.4 percent to 8.2 percent range.

Meanwhile, the DBCC expects the country’s inflation rate to moderate to 2.5 percent to 4.5 percent in 2023, with brighter prospects of taming it within the target range of 2 to 4 percent in the succeeding years until 2028.

The Philippine peso is also expected to weaken in 2023 to the 55 to 59 against the US dollar, coming from the 54 to 55 range seen in 2022.

The DBCC attributed the anticipated continued slide of the peso next year to heightened global uncertainties and aggressive monetary policy tightening of the US Federal Reserve, which serves as the western country’s central bank.

Still, the DBCC expects the peso to stabilize at 53 to 57 against the greenback in 2024 until 2028 due to the BSP’s policy normalization measures and expected pick-up in foreign exchange inflows.

Higher government revenues

Meanwhile, the government’s revenue projection was revised upwards to P3.5 trillion for 2022, a slight adjustment to the July projection of P3.3 trillion following better-than-expected revenue performance during the first 10 months of the year.

“This is attributed to the improved tax collection and digitalization efforts of the government,” said the DBCC.

The government is also seeing higher revenue projections in the mid-term, expecting it to reach P3.7 trillion in 2023 and P6.6 trillion in 2028—both of which are higher than the previous projections of P3.6 trillion and P6.5 trillion, respectively. INQ