Philippine economy eyes 5%-6% growth as inflation risks ease

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Philippine economy growth forecast

Highlights

Philippine economy grew 2.1% in Q3, down from 4% a year ago and below the government’s 3.5%-4.5% 2023 target.
Department Secretary Balisacan cites easing fuel prices and inflation risks but warns that El Niño and supply bottlenecks still threaten growth momentum.
To meet the 2023 target lower bound, Q4 growth must reach about 6.3%, or fiscal planning and revenue collection goals could face additional strain.

Growth outlook hinges on prices and weather

As reported by BusinessWorld Online, Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan says meeting the government’s 2027 growth target depends partly on easing inflation and limiting the effects of El Niño on the domestic economy.

He says recent declines in fuel prices could substantially lessen inflation pressure, although the lagged effects of earlier increases are still expected to be felt in November and December. He also says supply bottlenecks still need to be addressed to prevent remaining price pressures from spreading more broadly.

Balisacan says uncertainty over the severity of El Niño remains a key risk. While past El Niño episodes have had a relatively limited direct effect on overall growth because agriculture now makes up a smaller share of output, he says food price increases could still hurt consumer sentiment and weaken demand across the wider economy.

Weak growth complicates fiscal planning

The growth outlook comes as the Philippine economy expands by 2.1% in the third quarter, slower than the 4% pace a year earlier and the revised 2.4% in the second quarter. Growth in the first nine months stands at 2.5%, below both the 4.9% expansion recorded a year earlier and the government’s 3.5%-4.5% full-year target.

Balisacan earlier says the economy needs to grow by about 6.3% in the fourth quarter to reach the lower end of the annual target. He also says economic managers have not yet decided whether to recommend revising the 5%-6% growth target for 2027, pending a review of data, the external environment, revenue prospects, and the fiscal impact of new legislation.

He says weaker-than-expected expansion could weigh on revenue collections and make the government’s fiscal consolidation program harder to manage. In that scenario, the government would need to control spending flows more tightly while prioritizing productive and high-quality projects that can support growth within fiscal constraints.

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