Growth goal still ‘attainable’ — DBM

By Aubrey Rose A. Inosante, Reporter

THE PHILIPPINE ECONOMY can still grow within the 5.5-6.5% target this year as spending is expected to “normalize” in the fourth quarter, Department of Budget and Management (DBM)Secretary Amenah F. Pangandaman said.

Ms. Pangandaman, who also chairs the Development Budget Coordination Committee (DBCC), said the gross domestic product (GDP) growth target of 5.5-6.5% for this year “remains attainable.”

“Spending is expected to catch up and normalize toward the latter part of the year,” she told BusinessWorld in a Viber message on Oct. 15.

“Momentary slowdown in public infrastructure spending is expected as agencies do due diligence, especially DPWH (Department of Public Works and Highways) as it reviews and evaluates its roster of projects,” she said.

Finance Secretary Ralph G. Recto earlier this week said economic growth likely cooled in the third quarter, adding that the slowdown may continue until early 2026 as heightened scrutiny over anomalous projects dampens government expenditure.

President Ferdinand R. Marcos, Jr. had flagged anomalous flood control projects during his State of the Nation Address in late July. This sparked several investigations into alleged corruption involving lawmakers, government officials, and private contractors.

Earlier, Economy Secretary Arsenio M. Balisacan said the DBCC will wait for third-quarter data to be released on Nov. 7 before revising growth targets.

However, he noted that achieving the full-year growth goal has “become harder” due to a likely slowdown in government spending.

In the first half, GDP growth averaged 5.4%, slower than 6.2% a year ago.

Ms. Pangandaman said the economic team remains “vigilant and proactive” in managing fiscal risks while staying aligned with the medium-term fiscal framework.

In June, the DBCC tempered its growth forecast to 5.5-6.5% for 2025 and 6-7% for 2026, mainly due to “heightened global uncertainties” arising from the Middle East conflict and US tariffs.

Ms. Pangandaman said the country’s growth momentum will be supported by key factors, including sound macroeconomic fundamentals, easing inflation, and a lower interest rate environment.

She also cited favorable credit and financial markets, stronger private sector momentum, and more efficient public spending as driving economic growth.

In a separate statement on Thursday, Mr. Recto said the economy is expected to post stronger economic growth ahead, citing improved governance and institutional reforms following the flood control mess.

“Growth is being supported by low inflation, easing policy rates, strong consumer spending, and a vibrant labor market,” he said.

Headline inflation averaged 1.7% in the first nine months of the year, matching the forecast of the Bangko Sentral ng Pilipinas.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the DBCC may need to revise its macroeconomic assumptions to reflect more realistic conditions amid persistent global headwinds, fragile consumer confidence, and fiscal constraints.

The economic managers should also prioritize targeted stimulus and institutional reforms to support resilience, he said.

“It will be challenging but not impossible, despite the third-quarter slowdown,” Mr. Rivera said in a Viber message on Thursday.

“Growth will depend on whether domestic consumption and investment rebound during the holiday season, if government spending accelerates, and if inflation remains within target,” he added.

Ser Percival K. Peña-Reyes, director of the Ateneo Center for Economic Research and Development, said the DBCC should revise its growth targets in light of the corruption scandal over flood control projects.

“Corruption scandals have had a chilling effect on investor sentiment,” he said in a Viber message on Thursday.

Mr. Peña-Reyes said the economy likely expanded by 5.6% in the third quarter, accelerating from 5.2% growth in the same period a year earlier.

For the full-year, growth will likely settle at 5.5%, matching the lower end of the government’s target range but slower than the revised 5.7% in 2024.

Foundation for Economic Freedom President Calixto V. Chikiamco said the Philippine economy’s performance is likely to “disappoint” this year given the headwinds facing the Philippines.

“The picture could be worse next year when the Trump tariffs start to bite and global slowdown occurs,” he said in a Viber message.

RECTO REJECTS VAT REDUCTION
In addition, Mr. Recto warned against some lawmakers’ proposals to lower the value-added tax (VAT) rate to 10%, saying this move could result in “massive revenue losses” and force the government to borrow to fund basic operations.

“The entire VAT collection for 2025 of P1.39 trillion can only fund nine months’ worth of payroll, premium, and pension of active and retired government workers,” said Mr. Recto, who authored the measure that hike the VAT rate in 2005.

Several lawmakers have filed bills seeking to either scrap or cut the 12% VAT rate. VAT collections account for about a fifth of the Bureau of Internal Revenue’s total revenues.

Mr. Recto said excise tax collections, projected at P576 billion this year, would not be enough to cover the P965-billion budget for basic, tertiary, and technical-vocational education programs.