Economic team eyes 8-10% growth by 2022 after worse-than-expected plunge this year

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Metro Manila (CNN Philippines, December 3) — President Rodrigo Duterte's economic managers on Thursday conceded to an even wider contraction of the Philippine economy, seeing an 8.5-9.5% drop for 2020 ​as they mapped out an ambitious growth rate of up to 10% in the next two years. 

The inter-agency Development Budget Coordination Committee revised economic forecasts and targets to factor in latest developments, and price in the actual impact of the COVID-19 pandemic on the economy.

The revised government forecast logs closer to estimates of multilateral lenders and private sector economists.

READ: PH economy to shrink by 8.3% in 2020, left 'significantly scarred'

The steeper fall in domestic output compares to a 5.5% contraction projected back in August. Budget Secretary Wendel Avisado said the adjustment was due to the "prolonged imposition of community quarantines in various regions in the country."

The latest growth estimates assume most of the country will shift to modified general community quarantine next year and COVID-19 vaccines are readily available, Acting Socioeconomic Planning Secretary Karl Kendrick Chua said.

The economic team has repeatedly called to allow more industries to reopen and for public transport to increase capacity so more people can head out to work, shop, and travel to revive ailing sectors.

The Philippine economy has shrunk by 10% from January to September. However, the DBCC said they expect an even better turnout in the last three months of the year.

​Massive rebound

​The economic team laid out aggressive growth goals for the next two years.

By 2021, the DBCC sees a 6.5-7.5% growth rebound, followed by an 8-10% expansion by 2022. ​Chua said the optimism mainly comes from knowing that the vaccines will be readily available, which would also allow the state to lift all forms of quarantine restrictions.

Finance Secretary Carlos Dominguez III conveyed his confidence about the bounce back to rapid growth.

"The productive capacity of the Philippines has not been damaged," he said. "What has limited us is the fear of getting infection, but the factories are there, the call centers are there. The economy is just waiting for our people to have confidence that they will not get sick, and this economy – believe me – is going to boom."

READ: Gov’t to study further easing of age, business restrictions this holiday season — DTI

Trend annual growth pre-pandemic hovered above 6%, which has been on a decline under the Duterte administration. The team is counting on the rollout of big-ticket infrastructure projects to get the economy rolling again, although some projects have been delayed due to lockdowns earlier this year.

​Fiscal balance

Revenues are seen better than expected this year, pushing the DBCC to revise the projection to P2.85 trillion from P2.52 trillion, while spending will climb to P4.23 trillion previously. This would leave a narrower budget gap worth 7.6% of gross domestic product from a 9.6% ceiling previously.

​However, the budget shortfall will widen to 8.9% of GDP by 2021 before dipping to 7.1% by 2022.

The Philippines resorts to loans and debt papers to fund the budget gap in order to keep projects going despite lower tax collections and revenue sources.