Department of Finance (DOF) Secretary Ralph G. Recto said the Cabinet-level Development Budget and Coordination Committee (DBCC) should come up with a growth target that is “more realistic” not only for this year but for the medium-term.
“If you project a very high GDP, then you’re projecting a very high revenue. If you miss it, your deficit will increase and your debt-to-GDP will also increase, right?” Recto told reporters on the sidelines of the Economic Journalists Association of the Philippines’ (EJAP) Induction of 2024 Officers on Thursday evening.
Late last year, the economic team narrowed down the GDP growth target range for 2024 to 6.5 percent to 7.5 percent from the previous 6.5 percent to 8 percent.
For 2025 to 2028, the DBCC retained the growth assumptions of 6.5 percent to 8 percent.
Recto said realistically, the GDP target is at 6 percent, but he said they will try to hit 6.5 percent, adding that aspiring for a 7.5-percent target is “too high.”
“We will adjust the GDP downward, but we will ask the [Bureaus of Internal Revenue and Customs] to do more,” the Finance chief added.
The medium-term outlook, Recto said, should be “more realistic, tempered, but also aspirational.”
Meanwhile, he said a GDP target of 8 percent is still always up for review, as the national government is expecting more foreign direct investments to come in.
“Probably we can adjust those figures again upwards,” Recto added.
The DBCC is scheduled to meet on Friday, March 22. The economic team is comprised of the secretaries of the Departments of Budget and Management, and Finance, and the National Economic and Development Authority.
Inflation
Recto projected the average inflation rate for March to hit 3.9 percent.
Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. also said inflation in March may have been around 3.9 percent, closer to the higher end of the inflation target set. (See: https://businessmirror.com.ph/2024/03/21/bsp-inflation-could-have-hit-3-9-in-march/)
When asked if the inflation rate is likely to go beyond 4 percent after March, Recto said that “it is always a possibility.”
“But I think within the year, it’s still gonna be within 2 to 4 percent. So it’s gonna be a bumpy road,” he added.
The Finance chief also said interest rates would be higher for longer because inflation will also be higher for longer.
The BSP raised its policy rates to 450 basis points. Recto projected that in the next two years, rates could be cut by up to 200 basis points at most—still not fully recovered.