NEDA mulls lower GDP growth target for this yr

Despite the lifting of the temporary retraining order (TRO) on the expanded value added tax (EVAT) law, the National Economic and Development Authority (NEDA) is planning to scale down the government’s gross domestic product (GDP) growth target of 4.5 to 5.3 percent for the current year.

In a unanimous decision handed down last week, the Supreme Court ruled that the EVAT law was constitutional and it could take effect within 15 days.

This means additional revenues directly attributed to EVAT would only cover the last three months of 2005. The finance department said EVAT collections for the last quarter would amount to no more than P10 billion.

Socioeconomic Planning Secretary and NEDA Director General Augusto B. Santos said the 2006 GDP growth forecast of 6.3 to 7.3 percent may have to be revised.

"The 2006 forecast was made on the assumption that the EVAT was already in force in early 2005," Santos pointed out. "It is most likely that we are going to adjust downwards to 6.3 percent GDP."

That could mean a growth range of 5.7 to 6.7 percent. Santos said there are a lot of assumptions that need to materialize, such as the price of Dubai crude remaining in the modest $56 per barrel, and full revenue collections target met in the case of the sin taxes.

At the start of September this year, Dubai crude closed at $59.18 a barrel while the average price for August was $56.60.

The only probable bright spot, according to Santos, is a better-than-expected performance by the agricultural sector. But other than that, government is expected to trim down anew its full year growth targets.

The Development Budget and Coordinating Council (DBCC) is scheduled to review growth targets next week and has made overtures that a downgrading is in the offing.

Budget Secretary Romulo L. Neri had given his forecast at five percent while the NEDA formulated a simulated growth condition based on Dubai crude.

If Dubai crude breaks $60, GDP will crawl to 5.2 percent. And it will slip further 5.1 percent if Dubai crude breaks the $70 per barrel.

To achieve a 5.3 percent growth, and given the expected GDP growth of 4.7-5.1 percent for the second quarter, the economy would need to grow by 5.8 to six percent in the second half of the year.