Inflation is front and center in the minds of the economic managers who have recalibrated its path to a higher plane between now and next year when local output growth measured as the gross domestic product (GDP) is projected as high as 7 percent.
The Cabinet-level Development and Budget Coordination Committee (DBCC) has determined that the previous projected inflation path no longer applies given the absurd rise in the price of services and goods, particularly on food, making compulsory for the interagency body to adopt this year’s inflation footpath ranging from 5 percent to as high as 7 percent this year.
The DBCC earlier adopted a more benign 2.5 percent to 4.5 percent trajectory for the rate at which commodities prices change, an economic variable whose every rise is a tax on every Filipino regardless of whether one is an investor, entrepreneur or mere consumer.
That the assumed inflation path is seen taking to a higher plane this year means more trouble for a depositor who earns less than 3 percent a year for his money at the bank when inflation is 7.6 percent at the moment.
“The average inflation rate assumption for 2023 is increased to 5 to 7 percent from the previous assumption of 2.5 to 4.5 percent,” the DBCC said.
The DBCC nevertheless committed to adopt a wholistic approach to quenching the inflation fire by continuously implementing “immediate and medium-term strategies to alleviate inflation, ensure food and energy security and return to the target range of 2 to 4 percent between 2024 and 2028.”
Inflation pushed past the roof last year when it averaged 5.8 percent and thus far averaging 8.3 percent in the first three months this year on food price increases that have sent more Filipinos hungrier and poorer.
But the DBCC is optimistic that reforms and strategies outlined under the 2023 – 2028 Philippine Development Plan (PDP) could salvage the country’s double-digit poverty rate of 13.2 percent as of March this year down to single digit level by next year.
Economic expansion ranging from 6 percent to 7 percent this year should also remain buoyant year when it averages from 6.5 percent to as much as 8 percent next year, it said.
The local currency the peso was seen ranging from P53 to P57 per US dollar this year were to stabilize at this range as well.
Unless more geopolitical disruptions unravel, the cost of imported oil critical to the continued operations of the power generation community and the businesses and households they serve was similarly seen ranging from $70 to $90 a barrel this year but should improve to only around $53 to $57 beginning next year.
Goods exports were to accelerate from 3 percent growth this year to 6 percent next year and imports similarly to expand as well from 4 percent this year to 8 percent next year based on near-term global demand outlook and trade prospects, the DBCC said.
“We will continue to be guided by the medium-term fiscal framework (MTFF) to ensure the achievement of the administration’s socio-economic development agenda outlined in the PDP 2023 – 2028 while sustaining macro-fiscal sustainability and sustainable growth.
“As such, revenue projections in the medium term are expected to improve from P3.73 trillion in 2023 to P6.62 trillion in 2028, as proposed tax revenue measures under the MTFF such as the Package 4 or the Passive Income and Financial Intermediary Taxation Act, the VAT on digital service providers, and excise taxes on single-use plastics and pre-mixed alcohol are expected to be implemented starting in 2024. There will be three additional tax reform measures such as excise tax on sweetened beverages, motor vehicle road user’s tax, and mining fiscal regime,” the DBCC said.
The government plans to ramp up spending and sustain it beyond 20 percent of GDP, reaching P5.23 trillion this year to P7.77 trillion in 2028.
“This will enable the government to implement priority programs and strategies outlined in the 8-point socio-economic agenda and the PDP 2023 – 2028,” the DBCC said.
