The technical working group of government’s interagency economic body, the Development Budget and Coordinating Council (DBCC), met recently to reassess the country‘s macroeconomic targets in the wake of the expected economic fallout resulting from the attacks on the US and the contraction of the country‘s second biggest trading partner, and Japan.
The DBCC is composed of the National Economic and Development Authority, the Department of Finance, Department of Budget and Management and the Department of Trade and Industry.
Maintained during the DBCC meeting were the growth projection of 3.3-3.8 percent for gross domestic product (GDP), 3.8-4.3 percent for gross national product (GNP), and the fiscal program that pegs this year’s budget deficit to P145 billion.
The peso is expected to still hit the P50-P51 to the US dollar level by yearend while Treasury bill rates will average 10-11 percent.
On the downside, exports will drop to 15 percent from the previous target of 10 percent, while imports will decline by three percent.
Exports will suffer another cut because of the further weakening of the US economy after the attacks which will further delay its economic recovery.
Since some of the country’s exports have imported content or raw materials, the import growth target was also scaled down.
Last week, the IMF further downscaled its growth projections for the Philippines to 2.5 percent from three percent as the global economy continues to slowdown.
IMF managing director for the Philippines Sean Nolan said prospects for growth in the Philippines along with emerging markets in Asia were downgraded as industrial production and exports slowed down sharply because of the global slowdown, especially with the weakening of the technology sector in major exports markets such as the US and Japan.
Citing the IMF’s October 2001 World Economic Outlook, Nolan said further deterioration in external financial conditions could create difficulties for some regional economies, notably the Philippines.
The IMF said adding to the Philippines’ vulnerability is the weakness of the banking system and the corporate sector.
Of particular concern to the IMF is the country’s growing budget deficit which is targeted at P145 billion this year.
The IMF said the government and even the Bangko Sentral ng Pilipinas (BSP)’s ability to stimulate the economy through pump-priming has been weakened considerablyby a sizeable fiscal deficit.