Philippines downgrades growth forecasts over inflation, global slowdown

Philippines growth adjustment: The Philippines has adjusted its economic targets for 2024, reflecting a more cautious outlook amidst factors such as high inflation and global economic slowdown. Economic Planning Minister Arsenio Balisacan announced on Thursday that the country now anticipates a growth range of 6.0 per cent to 7.0 per cent for this year, down from the previous projection of 6.5 per cent to 7.5 per cent.

Similarly, the growth forecast for 2025 has been narrowed to 6.5 per cent to 7.5 per cent from the earlier 6.5 per cent to 8.0 per cent.

Economic adjustment factors

Balisacan cited various factors influencing these adjustments, including last year's below-target economic expansion of 5.6 per cent, fluctuations in oil prices, and expected trends in inflation and foreign exchange rates. He also highlighted potential challenges such as elevated food prices, potential wage hikes, and disruptions in supply chains due to geopolitical and trade tensions globally.

Despite these concerns, Balisacan expressed optimism about the country's growth momentum. However, to ensure flexibility in funding its infrastructure projects, the government has decided to raise the budget deficit ceilings for the years 2024 to 2028. Balisacan stressed the importance of continued borrowing to support growth, particularly in financing infrastructure projects like roads and bridges, which are crucial for enhancing productivity and economic potential.

Forex and inflation

Additionally, the government has adjusted foreign exchange assumptions for this year, narrowing the range to 55 to 57 pesos against the dollar. For the years 2025 to 2028, the range remains at 55 to 58 pesos against the greenback. Inflation targets have been maintained at 2 per cent to 4 per cent until 2028.

Looking ahead, the government plans to propose a 7.5 per cent increase in the national budget for 2025, aiming for it to reach 6.2 trillion pesos ($109.91 billion), up from this year's 5.77 trillion pesos.

(With Reuters Inputs)