The Philippines maintained its economic growth forecasts for this year through the end of President Ferdinand Marcos Jr.’s term, as it expects investments and consumption to withstand the impact of higher inflation.
(Bloomberg) — The Philippines maintained its economic growth forecasts for this year through the end of President Ferdinand Marcos Jr.’s term, as it expects investments and consumption to withstand the impact of higher inflation.
The Development Budget Coordination Committee, which sets economic assumptions for fiscal purposes, retained the growth view while revising inflation expectations for this year to an average of 5%-7% from 2.5%-4.5% forecast in December.
Gross domestic product growth is still projected at 6%-7% this year and 6.5%-8% for the succeeding years through 2028, according to economic managers.
The forecasts factor in “risks posed by geopolitical and trade tensions, possible global economic slowdown, as well as weather disturbances in the country,” Budget Secretary Amenah Pangandaman said in a media briefing Monday.
The Philippine economy grew 7.6% in 2022, the fastest in nearly half a century, as it recovered from Covid restrictions. While growth is expected to start trending lower amid a broader global downturn, the Southeast Asian nation is still forecast to be among the bright spots in the region.
The prospects for first-quarter growth “look good,” said Arsenio Balisacan, head of the National Economic and Development Authority. The Philippines is scheduled to report its economic performance in the first three months of the year on May 11.
The Marcos administration has been contending with elevated inflation, which has eased from a 14-year high, giving room for the central bank to consider pausing its most aggressive monetary tightening in two decades. Still, food supply challenges have persisted, prompting the state to consider importing rice, sugar and pork.
The central bank has raised its key rate by a cumulative 425 basis points since May 2022. It has set an inflation target of 2%-4% for this year, with Bangko Sentral ng Pilipinas Deputy Governor Francis Dakila saying Monday that he expects inflation to continue decelerating.
Economic managers still expect the budget deficit at 6.1% of GDP this year, while also keeping the view that the shortfall will narrow to 3% of output by 2028.
Proposed taxes on passive income, digital services, single-use plastics and pre-mixed alcohol are expected to start contributing to revenues next year, Finance Secretary Benjamin Diokno said. The government is also eyeing additional revenues from tax reforms on sweetened drinks, mining and road users beginning 2025, he added.
(Adds details on budget gap, tax plans in last two paragraphs.)
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