Finance Secretary Ralph Recto said late Thursday he will recommend a downgrade of the economic growth targets to the interagency Development Budget Coordination Committee, seeking to ease pressure on government finances amid geopolitical concerns and inflationary pressure that would keep interests rates “higher for longer.”
The DBCC meets Friday to review economic targets, which projects gross domestic product growth this year between 6.5 percent and 7.5 percent after rising 5.6 percent in 2023.
Recto said he is more comfortable with a minimum growth target of 6 percent. “It is better to under promise and over deliver,” said Recto, whose agency is tasked deliver the tax and other revenue needed to fund expenditures and keep the budget deficit in check.
The government targets a narrower budget deficit of P1.363 trillion this year, equivalent to 5.1 percent of GDP.
In January, the budget recorded an P88-billion surplus as revenue collection rose 21 percent to P421.8 billion. The growth in revenue outpace the 10.4 percent increase in spending.
Recto, who also sits on the policymaking Monetary Board of the Bangko Sentral ng Pilipinas, said geopolitical concerns and still building inflationary pressure should temper expectations of interest rate cuts.
The BSP has raised overnight rates aggressively in the last two years, pushing it to 6.25 percent from 2.0 percent, to tame inflation. After pausing last year, many in the market expected monetary authorities to deliver several rate cuts that could total a full percentage points.
Recto said rate reductions may still happen later this year but the size may not be at the level expected by the market. He said the central may deliver interest rate cuts of around 200 basis points but over a two-year to two-and-a-half-year period.
The BSP is scheduled to hold its policy meeting on April 4.
