Recto seeks ‘more realistic’ growth target

MANILA, Philippines — The Marcos administration may have to “temper” its growth ambition this year to make it more realistic, Finance Secretary Ralph Recto said, citing expectations of higher-for-longer interest rates and supply chain disruptions caused by geopolitical tensions.

Speaking to reporters on the sidelines of the induction ceremony for new officers of the Economic Journalists Association of the Philippines Thursday night, Recto said the current 2024 growth target range of 6.5 to 7.5 percent is “too high” considering present economic realities.

Recto made the remarks ahead of the Friday meeting of the interagency Development Budget Coordination Committee (DBCC), which sets the government’s fiscal and macroeconomic targets.

READ: DOF: Gov’t to set ‘more realistic’ growth targets

At this point, the finance chief explained it would be “realistic” for the government to aim for a 6-percent gross domestic product (GDP) growth for 2024. But he said the Marcos administration would nevertheless “endeavor” to hit a 6.5-percent expansion.

‘Underpromise and overdeliver’

“I think we should come out with something more realistic— not only this year, but for the medium term,” Recto said. “Because if you project a very high GDP, then you’re projecting a very high revenue. And if you miss it, your deficit will increase and your debt-to-GDP [ratio] will also increase,” he added.

“Underpromise and overdeliver. That’s what I believe.”

In 2023, the local economy grew 5.6 percent, easing from the 7.6-percent expansion in 2022 and falling below the Marcos administration’s 6 to 7 percent growth target.

READ: Economic growth slowed in 2023, missed gov’t target

The last time the DBCC adjusted its economic outlook was in December, when it lowered the previous 2024 growth target of 6.5 to 8 percent to the current level. For 2025 until 2028, the DBCC had said the economy could potentially grow between 6.5 to 8 percent.

Recto, who took the finance portfolio in January, has to deal with a state balance sheet that is saddled with pandemic-era debts at a time of high interest rates. It’s a task that, he said, would be carried out until the end of Mr. Marcos’ term, pushing back his political plans for now while also eyeing either a seat at the Senate or a gubernatorial post in the 2028 polls.

Geopolitical risks

At present, Recto said he is worried about geopolitical risks that can disrupt the supply chain and stoke inflation. He also expects interest rates to stay “higher for longer,” a condition that can crimp demand in the consumption-reliant Philippine economy.

“I think interest rates will be higher for longer because inflation will be higher for longer,” he said, adding that he expects the Bangko Sentral ng Pilipinas to cut its policy rate by a total of 200 basis points in the next two years.

“I expect a cut this year, but maybe less than what we previously thought,” he continued.