Philippines Adjusts 2024 GDP Growth to 6%-7%

Quick Look

• 2024 GDP growth projection adjusted to 6%-7%, down from 6.5%-7.5%.
• Fiscal deficit forecasts expanded to support infrastructure and human capital.
• Infrastructure spending is at 5%-6% of GDP to fuel growth.
• 2025 budget set at £6.2 trillion focusing on infrastructure and social services.
• Inflation and high borrowing costs remain key economic challenges.

In a decisive move reflecting the challenging global economic landscape, the Philippines has adjusted its economic growth projections for the upcoming years. This recalibration comes amid persisting inflation concerns and elevated interest rates, casting a shadow on the nation’s economic trajectory. As the country braces for a period of moderated growth, the government is simultaneously expanding its fiscal deficit forecasts to accommodate increased spending, aiming to bolster the economy through strategic investments in infrastructure and human capital development.

In a recent announcement, Economic Planning Secretary Arsenio Balisacan disclosed the country’s revised growth targets. For 2024, the gross domestic product (GDP) is expected to expand by six per cent to seven per cent, a slight dip from the previously forecasted range of 6.5% to 7.5%. The outlook for 2025 has also been adjusted to a tighter band of 6.5% to 7.5%, down from the initial projection of 6.5% to 8%. These adjustments reflect the Philippine government’s pragmatic approach towards addressing the “lower performance last year” and anticipating similar trends this year, largely attributed to the long-lasting effects of policy rates, the global economic slowdown, and rising oil prices.

Despite these adjustments, the Philippines should remain one of the fastest-growing economies in the region.

Fiscal Strategy and Future Outlook

The recalibration of economic targets has led to a significant revision of the government’s fiscal strategy.

The budget gap ceiling has been raised for this year and next. Specifically, it’s now at 5.6% and 5.2% of GDP, respectively. This is an increase from the previous estimates of 5.1% and 4.1%. Consequently, this expansion in the fiscal deficit is a strategic choice. It’s intended to finance increased government spending through 2026. This includes a focus on infrastructure and human capital development.

Moreover, the most significant increase in the deficit ratio is expected in 2026. This is two years before the next presidential election. It suggests a strategic timing for boosting economic activities and investments.

Despite these adjustments, the government’s determination for economic growth remains strong. The GDP growth outlook for 2026-2028 is still an optimistic 6.5% to 8%. Additionally, the administration has outlined a substantial national budget of £6.2 trillion for 2025. This budget emphasises infrastructure and social services, aiming to drive growth.

Inflation remains a central concern, with the central bank maintaining high borrowing costs to navigate through the economic turbulence.

However, the government is exploring various avenues to reduce the debt-to-GDP ratio, aiming for a more sustainable economic framework by the end of President Marcos’s term.

As the Philippines adapts to the evolving global economic environment, the government’s strategic fiscal and economic policies reflect a commitment to sustaining growth and development. With these revised projections and plans, the country is setting the stage for a resilient and forward-looking economic trajectory.