The government’s downwardly revised growth targets for the next two years better reflect current economic conditions, analysts said, although elevated inflation and sluggish consumer demand continue to pose downside risks.
The Development Budget Coordination Committee (DBCC) had lowered its gross domestic product (GDP) growth target for 2026 to 3.5%-4.5% from 5%-6% earlier, citing the possible escalation of the Middle East conflict, weak consumer and business confidence, and intensifying El Niño.
The DBCC had also lowered the 2027 GDP growth target to 5%-6% from 5.5%-6.5%, while the growth assumptions for 2028 to 2030 were reduced to 5%-6% from 6%-7%.
Economists have expressed varying views on the revised growth targets, with some considering them a fair assessment of the current state of affairs. Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, noted that the government’s expectations for this year were too high to begin with, especially as the critical consumer sector is still suffering from structural headwinds.
Mr. Chanco also pointed to sluggish government spending and muted private demand as potential downward risks, along with household spending and business investment feeling a renewed squeeze from the re-tightening of monetary policy.
The Bangko Sentral ng Pilipinas (BSP) raised its policy rate by 25 basis points to 4.75% on June 18, marking the second rate hike this year.
The DBCC also raised its inflation assumptions, citing elevated global commodity prices and supply shocks arising from the Middle East conflict. It now expects headline inflation to average 6%-7% in 2026, before easing to 4%-5% in 2027 and 2%-4% from 2028 to 2030.
Risks are tilted to the downside for GDP growth, according to analysts, including weak household spending from low consumer confidence, sluggish capital formation due to poor business sentiment, lack of fiscal stimulus, aggressive monetary tightening, and widening trade deficit given hefty import costs and steady exports.
Risks on inflation are tilted to the upside, with severe El Niño, hefty minimum wage and transport fare hikes, and prolonged global energy shock due to re-escalation of Iran war and prolonged closure of Strait of Hormuz being among the factors.
The government has revised its fiscal program, citing current macroeconomic conditions and geopolitical developments as having undermined the credibility and relevance of the growth targets and fiscal projections published by the DBCC in October.
The DBCC now expects the fiscal deficit to reach P1.66 trillion or -5.4% of GDP this year from its previous estimate of P1.61 trillion or -5.3% of GDP. For 2027, the fiscal deficit is expected to widen further to P1.69 trillion or -5.1% of GDP.
The government has proposed a P7.2-trillion national budget for 2027, which is equivalent to 21.7% of GDP, a 6% increase from this year’s P6.79-trillion budget.
Analysts have expressed mixed views on the proposed budget, with some considering it unlikely to give any significant stimulus to the slowing economy, particularly for ordinary Filipinos.
