(STAR) By Paolo S. Romero - The government announced yesterday its forecasts and macroeconomic assumptions for 2007 as it submits to Congress a P1.137 trillion proposed national budget for next year.

"Our fiscal aggregates are consistent with our macro-assumptions and our fiscal position is consistent with our deficit reduction strategy," Budget Secretary Rolando Andaya Jr. said yesterday.

Andaya said the government is projecting a gross national product (GNP) growth rate of six percent to 6.9 percent and a gross domestic product (GDP) growth rate of 5.7 to 6.5 percent for next year.

The Development Budget Coordinating Council, he said, has forecast a GNP expansion of 5.9 to 6.5 percent and a GDP growth of 5.5 to 6.1 percent for 2006.

Compared to the projected 6.9 percent to seven-percent growth this year, Andaya said inflation for 2007 was pegged at a slower 4.3 percent to 4.8 percent despite the continued rise in global oil prices and the imposition of the expanded value added tax.

For next year, the rate for the bellwether 91-day Treasury bill (T-bill) is expected at 5.5 percent to six percent while the peso is estimated to be between 51 and 53 to the dollar.

The Dubai Oil price was projected to range between $63 to $67 per barrel in 2007 or higher than the estimated average of $62 to $64 per barrel for this year.

Exports, Andaya said, are expected to post a higher growth rate next year than the estimated growth of between 10 percent and 10.5 percent this year while imports are projected to expand from 11 percent this year to 12 percent next year.

Andaya said the assumptions and projections were "anchored" on the following:

• Prospects of oil prices being higher with Saudi Arabia’s build-up of its refining capacity expected to be ready only by 2008;

• Emerging lower inflation rate with the 12 percent value-added tax already anticipated to have no incremental impact on 2007 inflation;

• Interest rates are lower than 2006 levels due to lower inflation rates and fiscal gains from deficit reduction program;

• Foreign exchange rates are expected to remain stable as assessed by the Monetary Board; and

• Exports and remittances from overseas Filipino workers being stronger than expected.

Andaya said that in accordance with the Arroyo administration’s Medium Term Fiscal Plan, the government is targeting a deficit of P63 billion for 2007 or 0.9 percent of GDP.

"This compares with the projected deficit of P124.9 billion or 2.1 percent of GDP in 2006, and is the best take-off position to a balanced budget," he said.

Andaya said the P1.1 trillion projected revenue collection for 2007 is 14.8 percent higher than the 2006 revenue target of P974.2 billion.

Such revenue prospects, he said, assumes an improvement in tax collection effort from 14.6 percent of GDP this year to 15.3 percent in 2007.

"On the other hand, disbursements are projected to increase at a slower pace at 7.5 percent mainly due to reduction in interest payments," Andaya said.

Chief News Editor: Sol Jose Vanzi

All rights reserved