Recto sets sights on ‘more realistic’ targets

MANILA, Philippines — Nearly a month in office, the head of the government’s economic team is already looking at a review of growth and fiscal targets this year and over the medium term, noting that global developments should prompt for “more realistic” expectations.

Finance Secretary Ralph Recto said the Cabinet-level Development Budget Coordination Committee (DBCC) is evaluating the goals under the medium term fiscal framework (MTFF) which was crafted during the start of the Marcos administration.

“The fiscal plan was made when President Marcos assumed office in 2022, there was no Middle East conflict yet, and the Ukraine war just started,” Recto said.

“Thereafter, commodity prices increased particularly for food and oil. That plan was done way back a year and a half ago,” he said.

Initiated by former finance chief and now Monetary Board member Benjamin Diokno, the MTFF aims to attain macro-fiscal stability while remaining supportive to economic recovery.

The framework also targets to consolidate resources and utilize for maximum benefit and high multiplier effects for the economy.

“It (MTFF) is always under review and more so today,” Recto said.

Specifically, he noted that the gross domestic product (GDP) is being discussed. Under the MTFF, GDP growth for 2024 should be at 6.5 percent to eight percent.

However, the DBCC in December 2023 reduced this to just 6.5 percent to as much as 7.5 percent. Recto recently attended a special DBCC meeting but the economic team did not come out with new growth expectations.

“I think we have to come out with more realistic targets. I think we need some adjustments there, something more realistic but still high for 2024 and beyond,” Recto said.

The DBCC earlier said challenges remain for 2024 including elevated inflation because of the onset of El Niño, external price pressures from geopolitical tensions, and the imposition of export bans in other countries.

Economists also warned that the economy may expand at a slower pace this year as elevated interest rates and lagging state spending dampen investments.

Similarly, the finance chief emphasized that the rest of the parameters in the MTFF are also being looked at.

“We are reviewing all of that. It is a six-year term for the President, one year and a half have passed, we know what’s happening globally so we have an idea of something more realistic,” Recto said.

Based on the MTFF, the government aims to cut the deficit-to-GDP ratio to three percent by 2028. The ratio is at 5.71 percent as of the third quarter of 2023.

Debt-to-GDP is also seen at around 50 percent by the end of the Marcos administration. Last year, the share of national debt to the country’s output eased to 60.2 percent and is about to break below the internationally accepted threshold.