Citing external headwinds, Marcos administration tempers 2023 growth ambition

MANILA, Philippines — The Marcos Jr. administration downgraded its growth aspirations for next year amid roiling global economic headwinds.

In the last briefing of the Development Budget Coordination Committee this year, the inter-agency body projected the economy to grow between 6-7% in 2023, lower compared to their their previous forecast of 6.5-8%.

The growth target for this year was kept at 6.5-7.5%..

By 2024 onwards, economic managers project economic growth to accelerate 6.5-8%.

Rosemarie Edillon, undersecretary for policy and planning at the National Economic Development Authority, hammered home the reason for the adjustment: a global economic slowdown in 2023.

Economists and analysts are expecting the global economy to fall into a technical recession, as the impact of the US Federal Reserve’s aggressive interest rate hikes will buffet markets everywhere.

Inflation is also another sore point for the national government, as the increase in prices of consumer goods and services have yet to ease. The DBCC revised its inflation projection up, from 4.5-5.5% this year to average 5.8% instead. This means the government already conceded that it would miss its 2-4% annual target for this year.

Inflation rose to a feverish pace of 7.7% year-on-year in October, a near 14-year high.

The DBCC kept its inflation forecast for 2023 between 2.5-4.5%. Edillon said that inflation would likely slowdown next year, keeping in line with the Bangko Sentral ng Pilipinas’ revised projections.

Economic managers are also expecting the national government’s deficit to improve this year. The DBCC revised its deficit target at 6.9% of GDP, this was lower than the initially-projected 7.6%.

The deficit outlook for 2023 was kept at 6.1% of GDP.

The country’s budget deficit levels left mixed reactions among experts in the past month. One economist pointed out that the increase in the country’s budget deficit augurs well for the government’s spending priorities.

The budget is increasingly strained owing to a limited fiscal space as a result of the Duterte administration’s borrowing spree to fund its pandemic response.

Likewise, the DBCC is projecting the Philippine peso to weaken by 2023. Economic managers expect the local unit to average P54-55 against the surging dollar this year. By next year, the DBCC forecast the local unit would trade against the dollar between P55-59.

For Nicholas Antonio Mapa, senior economist at ING Bank in Manila, the DBCC's projections were in-line with expectations.

"With the triple threat of elevated inflation, rising borrowing costs and high debt growth can be expected to slow next year," he said in a Viber message.

"Add to that projections for recession in developed markets and 2023 will prove to be a challenging one even for the Philippines," Mapa added.