Government sticks to growth targets

Despite the lower growth forecast of the International Monetary Fund (IMF) and the onslaught of more bad news, the government is sticking to its growth targets this year.

"We are constantly reviewing our targets to see if there’s a need to revise it, but so far, we do not see the need to change it," Finance Secretary Jose Isidro Camacho said, in reaction to the recent assessment of the IMF on the economic prospects of the country.

The IMF projected a three-percent gross domestic product (GDP) growth for this year, based on the modest pickup in domestic demand. This is lower than government’s own projection of a 3.3-percent to 3.8-percent GDP growth.

GDP is the total value of goods and services produced within a country, and is the basic benchmark for economic growth.

"That is the IMF’s opinion, we will still try to do our best to achieve our own targets," Camacho said.

The IMF report also stated that it expects moderate growth this year but at the same time warned that downside risks are significant.

"The main downward risks stem from weakening global demand for electronics exports and the budget deficit, where higher-than-targeted domestic financing could put upward pressure on interest rates," the IMF said.

Camacho said government is already taking steps to address its budget deficit, including tax measures to improve the collection of the Bureau of Internal Revenue.

The IMF suggested to the National Government to take "further steps to put the public finances on a sound footing." The IMF noted that it is necessary to contain the budget deficit this year given the high public debt and financing constraints.

The inter-agency Development and Budget Coordinating Committee (DBCC) meets almost weekly to review government’s targets and to adjust these if needed.

So far, the DBCC meetings have resulted in the revision of the GDP, while this year’s export growth target was also downscaled to just one percent from four percent.

The lower export growth forecast was made after the steady decline in export revenues starting this year, a result of contracted shipments to the US and Japan, the biggest markets for locally-produced goods.

At the start of the year, government projected exports to grow by eight percent, but this was revised and cut in half to four percent after US and Japan showed signs of economic strain.

Foreign investment bank ING Barings trimmed its US economic growth forecast to 1.6 percent from two percent, while Japan’s growth has been slashed to one percent from 2.6 percent earlier. This would result in slower global growth of three percent compared to an earlier forecast of 3.6 percent.

Aside from a lower export target, the growth projection for gross national product or GNP has been placed at a range of 3.5 percent to 3.9 percent, lower than the original projection of four percent to 4.5 percent. At the same time, economic managers also revised their foreign exchange rate assumptions for the year to P49 to P50 versus the dollar from P47 to P49.

And even as the Bangko Sentral ng Pilipinas (BSP) and the Bureau of Treasury are trying to peg interest rates to single-digit levels, the DBCC said the bellwether 91-day Treasury bills will average 12 percent. – Rocel Felix