PH cuts economic growth target to 6%-7% — NEDA chief Balisacan

National Economic Development Authority (NEDA) Secretary Arsenio Balisacan said Thursday that the Development Budget Coordination Committee (DBCC) has revised the growth target for 2024 to the 6% to 7% range, down from the previous target of 6.5% to 7.5%.

Balisacan made the announcement during a Palace press briefing a day after the 16th full Cabinet meeting with President Ferdinand "Bongbong" Marcos Jr.

The NEDA chief also said that the growth target for 2025 was narrowed to 6.5% to 7.5% from the earlier 6.5% to 8.0%. For 2026 to 2028, the 6.5% to 8.0% growth target was retained.

''The revised targets for our headline indicators considered the country’s recent economic performance in fiscal year 2023 and reflect the latest developments and expectations on external factors such as global demand and trade growth, oil price movements and expected exchange rate and inflation trends,'' he said.

''The DBCC revised gross domestic product or GDP growth target for 2024 is… for 2024 to 6.0 to 7.0 percent from six and half to seven and half percent,'' Balisacan said. 

When it comes to inflation, Balisacan said the targets were retained at 2.0% to 4.0% for 2024 until 2028.

He said that the inflation outlook considers the monetary policy actions currently undertaken the Bangko Sentral ng Pilipinas, and the monetary strategies and measures being implemented by the Philippine government.

Balisacan said the growth targets would sustain the country’s position as one of the fastest growing emerging economies in the Asia-Pacific Region.

'We considered in… are examining the prospects for our economy in the medium term and despite that we feel that the growth trajectory should not be affected adversely. We have to adjust to these global geopolitical tensions – and that’s what every economy is doing and I think I don’t see that we are exempted from that,” Balisacan said.

The DBCC said that to ensure that inflation remains within the target band, the government will have to accelerate the implementation of strategies under its Reduce Emerging Inflation Now (REIN) plan.

It also said the recalibration of growth targets would ensure that the government’s targets respond more directly to the needs of the Filipino people and that strategic growth enhancing fiscal consolidation is being pursued for sustainable and inclusive development.

The DBCC, an interagency body composed of the chiefs of budget and management, finance, and socioeconomic planning, is tasked to review and approve macroeconomic targets, revenue projects, borrowing levels, and budget and expenditure ceilings.

Earlier, Finance Secretary Ralph Recto said the Marcos administration's economic managers were likely to trim their economic growth targets for this year all the way to 2028.

"I think we should come out with something more realistic [with regard to the targets] not only this year but for the medium-term until 2028," Recto told reporters last month.

In its December 2023 meeting, the DBCC also revised the 2024 GDP target to 6.5% to 7.5% from the previous 6.5% to 8%. However, the 6.5% to 8% target range was retained for 2025 to 2028.

Ahead of the December meeting, Balisacan had said that the upper end of the 2024 growth target might already be out of reach since "all the multilateral agencies are seeing that the global economy is not as expansive as initially expected."

The Philippine economy as measured by GDP — the total value of goods and services produced in a period — grew by 5.6% in 2023, falling short of the government’s target band as elevated interest rates resulting from high inflation environment dampened consumption.

Budget deficit ceilings

Apart from GDP growth targets, the Marcos administration’s economic team also updated its Medium-Term Fiscal Program (MTFP).

Citing the DBCC’s revised MTFP, Balisacan said the government is projecting a fiscal deficit of P1.48 trillion in 2024, wider than the P1.4-trillion budget gap projected for in December last year.

As a percentage of GDP, the budget deficit is expected to be at 5.6%, higher than the earlier projection of 5.1%.

All the way to 2028, the budget deficit-to-GDP ratio is projected to gradually go down to 3.7%. This, however, was an increase from the DBCC’s previous assumption of 3% of GDP come 2028.

In a joint statement, the DBCC said the revised budget deficit ceilings “provide the necessary fiscal space to support the government’s spending plan to invest more heavily in infrastructure and human capital development and provide adequate and well-targeted social services.”

Despite the expected higher fiscal gaps, Balisacan said that the government will further improve its performance through enhanced tax administration reforms focused on modernizing and enhancing the efficiency of the Philippine tax system.

“We will complement these measures by working with Congress to pass priority tax reform measures to recalibrate and further improve revenue mobilization and ultimately be more attuned to the country's fiscal requirements and current domestic developments,” the NEDA chief said.

“With these expected reforms, we project revenues to reach P4.270 trillion (16.1% of GDP) in 2024 and rise to P6.078 trillion (16.4% of GDP) by 2028,” he said.

Debt-to-GDP ratio is also seen to settle at 60.3% this year until it reaches 55.9% by 2028.

This is well within the internationally accepted threshold of 70%, as recommended by the International Monetary Fund, according to the DBCC.

The Philippines ended 2023 with a debt-to-GDP ratio of 60.2%.

“These fiscal targets reflect the DBCC’s commitment to balancing the requirements of supporting economic growth while ensuring prudent fiscal management by keeping the country’s debt profile in the median of comparable countries in the ASEAN, among peers with similar credit rating, and other emerging market economies,” the DBCC said.— VDV/RF, GMA Integrated News