Recto eyes lower GDP target until ‘28

Finance Secretary Ralph Recto hinted at the possibility of lowering the Gross Domestic Product target for the Philippines, citing the need for a more realistic approach in economic projections not just for this year but for the medium term until 2028.

“We should come out with something more realistic not only this year but for the medium term until 2028 because if we project a very high GDP, projecting a very high revenue, and if you miss it, your deficit will increase and your debt-to-GDP will also increase. So I think we should be responsible with that,” Recto said on the sidelines of the Economic Journalists Association of the Philippines 2024 Board of Directors induction Thursday evening.

During its December 2023 gathering, the Development Budget Coordination Committee established a growth objective of 6.5 percent to 7.5 percent for the GDP in 2024. For the subsequent years from 2025 to 2028, the target was adjusted to a range of 6.5 percent to 8 percent.

The DBCC, consisting of the heads of Budget and Management, Finance, and Socioeconomic Planning, is an interagency body responsible for evaluating and endorsing macroeconomic goals, revenue projections, borrowing thresholds, as well as budget and expenditure limits.

Recto elaborated on the rationale behind the potential adjustment, highlighting the importance of fiscal responsibility.

“Nevertheless, we pushed the (Bureau of Internal Revenue), Customs and the Treasury to collect more. So there must be some efficiency gain, right? That’s what we will do. We will adjust the GDP down but we will ask the BIR and the BoC to do more,” he said.

In 2023, the Philippine economy, gauged by the GDP (the aggregate worth of goods and services generated within a timeframe), expanded by 5.6 percent.

However, this figure fell below the government’s targeted range primarily due to increased interest rates prompted by a high inflation environment, which consequently subdued consumption levels.

“What are the market projections? What seems to be the 5.6 to 6.3. I think 6 percent is a good number, aspirational. I think we should hit for 6.5. Realistic is 6 but we will endeavor to hit 6.5, that’s how I’m looking at it,” Recto said.

“I think that (target of 7.5 percent GDP growth) is too high. We hit 5.6 percent last year, the highest in the region. But what’s the headline? The Philippines fails to hit the target. I’m saying I would rather have a headline ‘Philippines hits the highest in the region at 6.0 percent or 6.5 and hits its target,’” he said.

Looking ahead to the medium-term outlook, Recto stressed the importance of realism tempered with aspiration.  He said the DBCC is already working on medium-term fiscal plans until 2028.

He said adjustments in economic targets are not only imminent but necessary for sustained growth.