2024 GDP growth can still hit 6%, says Neda

NEDA chief Arsenio Balisacan. Senate PRIB file photo / Voltaire F. Domingo

MANILA, Philippines — The economy could still hit the 6 percent growth target this year, even if the Bangko Sentral ng Pilipinas (BSP) decides to cut rates later than previously expected, the state’s chief socioeconomic planner said.

Speaking to reporters on Monday, Secretary Arsenio Balisacan of the National Economic and Development Authority (Neda) said the Marcos administration’s tempered gross domestic product (GDP) growth target of 6 to 7 percent for 2024 already took into account the possibility of interest rates staying higher for longer.

“When we looked at the 6 to 7 percent, that’s more or less already given because we know that the interest rates have at most five quarters of impact down the road,” Balisacan said.

READ: Marcos admin cuts 2024, 2025 growth targets

“The result of the policy actions last year are expected to be felt this year,” he added.

Balisacan’s optimism defies the bleak outlook of some economists who see expensive borrowing costs as a major obstacle to the government’s ambition to achieve a 6-percent growth.

This is because a high-interest rate environment could crimp financing for household activities and business expansion plans.

6.5 percent

The BSP has so far kept its key rate unchanged at 6.5 percent, the tightest in nearly 17 years. What’s prompting the central bank to stay hawkish is persistently high inflation that may breach the BSP’s 2 to 4 percent target anew.

Already, BSP Governor Eli Remolona Jr. admitted that the room to ease monetary policy has narrowed, as he floated the possibility of a later rate cut in the first quarter of 2025 if inflation behaves badly.

READ: Peso sinks to 17-month low vs dollar

A weak peso may also force the BSP to keep local yields competitive, as the greenback regained strength recently amid heightened tensions in the Middle East and increasing bets on a delayed easing by the US Federal Reserve.

Oil prices

According to Balisacan, the Philippines can achieve a 6-percent expansion as long as inflation remains benign and does not breach the state’s 2 to 4 percent target.

READ: March inflation higher at 3.7% but still within gov’t target range

The Philippine Statistics Authority will release the inflation data for April on May 7, and Balisacan is hoping that price growth this month will be “close” to the 3.7 percent reading in March even in the face of volatile global oil prices due to conflicts in the Middle East.

“What we are watching is the 2 to 4 percent target for the year because inflation can go up, go down, but what we want is to keep that within the band so that there will be not much instability in the market,” he said. INQ