Philippine growth expected to realign with target by 2027

If realised, the outlook would mark a fourth consecutive year of missed growth goals, following shortfalls in both 2023 and 2024, according to highlights of the Monetary Board’s policy meeting.

The Marcos administration has set growth targets of 5.5 to 6.5 per cent for 2025 and six to seven per cent for next year. While these are unlikely to be achieved, the BSP said the economy may only return to its target range by 2027, the administration’s second-to-last year.

“Overall domestic demand may moderate based on high-frequency indicators,” the central bank noted.

“In addition, ongoing controversy over flood control projects, public infrastructure spending may delay implementation and dampen investment sentiment,” it added, while noting that initiatives to prevent fiscal leakages could nevertheless boost overall budget efficiency and growth prospects over the longer term.

Last month, the Monetary Board cut the key interest rate by 25 basis points to 4.75 per cent, aiming to steady business sentiment shaken by a widening probe into allegedly dubious flood control projects.

The central bank had also warned that the corruption scandal could limit the ability of government spending to support growth. As it is, the administration is aiming to keep infrastructure investment at five to six per cent of gross domestic product to help sustain economic momentum.

GOVERNMENT SPENDING

True enough, the state’s economic managers already acknowledged that hitting even the lower end of the government’s growth target for 2025 would be very challenging, after the economy expanded four per cent in the third quarter, the weakest pace in four years.

BSP Governor Eli Remolona Jr earlier said another rate cut in December was “possible”, but ruled out any aggressive easing that could fuel concerns the economy is careening toward a hard landing.

Remolona added that the economy may “more than catch up” with the momentum lost by 2027, believing that the slowdown may prove to be short-lived. The pace of that rebound, he said, would determine how much further the central bank could ease policy in the months ahead.

Offshore, the central bank also flagged “lingering global uncertainty” that could temper investor sentiment. Even so, it maintained that “future monetary policy adjustments will continue to be guided by evolving risks to inflation and growth.”

“On balance, the favourable inflation outlook and moderating domestic demand provided scope for a more accommodative monetary policy stance to support economic activity,” the BSP said.

Source: Borneo Bulletin