Devastating calamities that have ravaged the Philippine archipelago caused a serious impact on the growth of the local economy, dragging the full-year growth away from the target, President Marcos’ chief economic manager said.
“We probably did not hit our growth targets in 2024 because of the numerous typhoons,” Department of Finance (DOF) Secretary Ralph G. Recto told reporters during a press chat on Thursday, Jan. 16, affirming the possibility of a below-six-percent expansion rate.
For the third quarter of 2024, the Philippine gross domestic product (GDP) growth slowed to 5.2 percent, falling sharply from the 6.4 percent rate seen in the second quarter.
The first three quarters settled at an average growth rate of 5.8 percent, falling short of the revised 6.0 to 6.5 percent target range. Recto explained that hitting the target will be unlikely because the third-quarter level is below six percent.
Meanwhile, the finance chief sounded optimistic that the fourth-quarter growth will “definitely be faster” than the third quarter. He even welcomed the possibility of the fourth quarter hitting six percent.
Socioeconomic Planning Secretary Arsenio M. Balisacan earlier noted that a growth rate of at least 6.5 percent is needed in the last quarter in order to still achieve the goal.
Recto said that he would “be happy” if the country’s economic performance reached six percent in the fourth quarter, admitting further that a six-percent figure for the full-year average is out of reach.
However, he is upbeat on his projection that the country’s growth will “surpass six percent in 2025.” For this year, the government is setting an eye to a wider range of six to eight percent growth rate, citing both domestic and global uncertainties.
Eight percent GDP?
When asked whether an upper range of eight percent is attainable or not, Recto said “it all depends on how much investments take place. He said that the government is targeting a 17-percent revenue-to-GDP ratio by 2028, aligning with the country’s fiscal goals.
According to the finance chief, the budget is currently at roughly 22 percent, which the national economic team aims to bring down to 20 percent.
“Incidentally, we’re at par with the region insofar as revenues are concerned,” Recto stressed, noting that the country has already reached the regional average which currently stands at 16.5 percent.
He, however, pointed out the country’s gap on the expenditure side, noting that the country’s spending—at around 22 to 23 percent of GDP—exceeds the regional average of approximately 20 percent or less.
“If you look at the macro fiscal framework, we’re also working to reduce expenditures,” he assured. “By next year, much will depend on external factors, such as developments in the Trump presidency, as well as interest rates and inflation.”
“If we can successfully lower interest rates, we anticipate an increase in both domestic and foreign investments,” he added.
Recto further said that prior to the pandemic, from 2010 to 2019, the average growth rate was about 6.4 percent, with interest rates at roughly four percent.
“Today, under President [Marcos’] administration, the debt-to-GDP ratio has reached 62 percent, interest rates have climbed to 6.5 percent, and yet the economy continues to grow at six percent," he argued.
For 2025, Recto projected a growth rate at a faster pace than what was seen in 2024 “because the interest rates are going down already.”
“Let me point out first that the Philippines is still one of the fastest growing economies, not only in the region, but in the world. I think that will continue in 2025,” he concluded.