The Development Budget Coordination Committee (DBCC) foresees a steeper 8.5% to 9.5% contraction for the Philippine economy in 2020 from the 5.5% decline projected in July
The economy is seen to bounce back to a 6.5% to 7.5% growth in 2021 and 8% to 10% growth in 2022
DBCC expects exports and imports to contract this year by 16% and 18%, respectively
Revenue collections of the Bureau of Internal Revenue and Bureau of Customs for this year are expected to increase to P2.85 trillion following above-target performance
The Development Budget Coordination Committee (DBCC) foresees a steeper 8.5% to 9.5% contraction for the Philippine economy in 2020 from the 5.5% decline projected in July, following the prolonged community quarantines in various regions of the country.
Despite a lower projection, the DBCC maintained that the economy will be “on the right track towards full recovery” with further relaxation of restrictions and improvement in the healthcare system’s capacity.
DBCC noted that the 11.5% contraction of the country’s gross domestic product (GDP) in the third quarter is slower than the 16.9% decline in the second quarter, which had sent the country into technical recession as the months-long pandemic quarantines took their toll on the economy.
It expects further improvement in the country’s GDP numbers in the fourth quarter, noting that “as we carefully and proactively manage the risks, a strong economic recovery and solid growth remains within our reach.”
The committee also expects the economy to bounce back to reach 6.5% to 7.5% growth in 2021 and expand by 8% to 10% in 2022, figures that are higher than the 6.5% to 7.5% growth forecast for 2021 to 2022 made last July.
“As the economy gradually moves towards full reopening, we expect significantly better economic outcomes next year,” DBCC said in a statement.
The committee primarily reviews and approves the macroeconomic targets, revenue projections, borrowing level, aggregate budget level and expenditure priorities, and recommends to the Cabinet and the President the consolidated public sector financial position and the national government fiscal program.
In line with recent trends in global trade, DBCC maintained that goods exports and imports will contract this year, declining by 16% and 18%, respectively.
These are expected to pick up by 2021 and 2022 with the growth of goods exports maintained at 5% and growth of goods imports pegged at 8%.
Meanwhile, following the above-target performance of the Bureau of Internal Revenue and Bureau of Customs since July 2020, estimated revenue collections for this year have been increased from P2.52 trillion to P2.85 trillion, equivalent to 15.7% of GDP.
Revenue projections for 2021 and 2022 have also inched up to P2.88 trillion and P3.31 trillion, respectively. The adjustments already factor in the expected impact from the implementation of the Corporate Recovery and Tax Incentives Reform (CREATE) bill, which was passed by the Senate on third and final reading last month.
The CREATE bill seeks to reduce the corporate income tax rate from the current 30% to 25% to assist the struggling business sector and help micro, small, and medium enterprises retain their workers.
The passage of the Financial Institutions Strategic Transfer Act (FIST), which will let banks offload souring loans and assets, is also seen to allow banks to extend more credit to COVID-hit sectors in need of assistance. The availability of financing for businesses and the continued strength of Philippine banks will also be critical in protecting jobs.
The 2021 national budget, meanwhile, will be the heftiest stimulus package for the economy, enabling public spending to stimulate recovery, DBCC said.