The Philippines on Tuesday cut its growth targets for this year and next, but vowed to spur activity in one of Asia’s fastest growing economies by spending more on infrastructure.
The economy is now expected to grow 6-7 percent this year, from the previous forecast of 6.8-7.8 percent, Budget Secretary Benjamin Diokno told a media briefing.
For 2017, the growth target was trimmed to 6.5-7.5 percent from 6.6-7.6 percent. The economy grew 5.9 percent in 2015.
Weak farm output due to drought and external headwinds were expected to drag on overall growth into next year, Diokno said.
To support activity, the government will increase next year’s budget deficit to 3 percent of its gross domestic product (GDP) from 2.5 percent this year, which had already been upwardly revised, he added.
The deficit ceiling will be at 3 percent from next year through the end of the six-year term of President Rodrigo Duterte, who was sworn in on June 30.
For the rest of Duterte’s term through 2022, Diokno said annual GDP should grow by 7-8 percent.
“We will make sure we will not put projects in the budget that are not ready for implementation,” he said.
Duterte’s economic team has promised sweeping changes to boost infrastructure, fix traffic congestion, improve investment frameworks and maintain robust economic growth.
Infrastructure spending will increase to 5.2 percent of GDP next year from a projected 5 percent this year, Diokno said.
The government is aiming for a wider tax base to fund increased spending. On Tuesday, Finance Secretary Carlos Dominguez said he will review exemptions to a 12 percent sales tax.
The government is targeting a national budget of 3.3 trillion pesos in 2017, up from 3.002 trillion pesos for this year.