Govt must ‘work harder’ to hit GDP target

ACHIEVING the lower end of this year's growth target is still possible but will require more aggressive efforts to boost exports and expand trade ties, a Cabinet official said.

Gross domestic product (GDP) growth expanded by a lower-than-expected 5.4 percent in the first quarter, marginally rising from the 5.3 percent seen three months earlier but lower than the 5.8-percent median in a Manila Times poll of analysts.

It was also short of the government's 2025 goal of 6.0-8.0 percent.

The economy needs to grow by at least 6.2 percent for the remainder of the year to hit the full-year target, Socioeconomic Planning Secretary Arsenio Balisacan told reporters on Thursday, pointing to a wider trade deficit as a key factor behind the weaker-than-expected first-quarter performance.

“I was looking at the numbers. What reduced the growth was the very sharp increase in the trade deficit,” he said.

The net exports deficit, in particular, widened by almost 20 percent and “easily chipped away 2.1 percentage points off the growth.”

“If exports and imports had grown in tandem, then the GDP growth could have been 6.2 percent … so it's doable,” Balisacan said.

“We just have to work on those critical issues. We clearly have to work harder to make our exports more competitive to find new markets and that's why I've been very, also taken the view that we need to be more aggressive with opening up or joining regional groupings, including concluding free trade agreements with many countries.”

Balisacan said the country should pursue trade deals with more countries and not just a few as in the past, adding that the Philippines should also diver-sify its exports and markets to avoid being too dependent on any single one.

“I think we need to deepen our structural and policy reforms. We have to work on those issues that are being raised by our investors and while we have progressed much, we need to be faster in addressing those concerns because our neighbors are moving even faster,” he said.

“We have to make the country more competitive globally and in the region.”

Balisacan also highlighted the need to continue improving infrastructure, including both physical transport and digital connectivity, as digital gaps can af-fect areas like education.

He also stressed the importance of investing more in innovation, saying the country must boost its creative capacity.

Balisacan, who heads the Department of Economy, Planning and Development — formerly the National Economic and Development Authority — also called for stronger coordination with Congress to ensure that the national budget supported key priorities such as raising productivity, promoting inclusive growth, reducing poverty faster and creating better jobs.

“These should be the basis for how we spend our limited resources,” he said.

Fiscal consolidation efforts, reducing the deficit and lowering debt as a share of GDP will also send a positive signal to markets, Balisacan continued, helping bring down borrowing costs for both the government and businesses.

“These are the fundamentals — low inflation, a manageable deficit and debt, and investment in education, innovation, and connectivity,” he said.

Boost from easing inflation

Monetary authorities, meanwhile, expect the economy to benefit from disinflation with growth likely to settle close to the low end of the government's growth targets for 2025 to 2027.

“Domestic economic activity may benefit from disinflation but faces downside risks,” the Bangko Sentral ng Pilipinas (BSP) said in highlights of last month's Monetary Board policy meeting that were released on Thursday.

“BSP staff estimates suggest slightly lower growth forecasts for 2025 relative to the previous forecast round in February,” it added.

Consumer price growth hit a five-year low of 1.4 percent last month, down from March's 1.8 percent and the slowest since November 2019's 1.2 per-cent.

Inflation expectations remain anchored within the government's target range, the BSP said.

It said that based on a March survey, private sector analysts expect inflation to average 3.1 percent this year, 3.3 percent in 2026 and 3.4 percent in 2027.

The analysts flagged potential upside risks to inflation from geopolitical tensions, shifts in global trade policies, adverse weather conditions and possible increases in utility rates, transport fares and minimum wages.

On the other hand, lower rice prices were seen as a key downside risk.

Inflation is expected to stay below the midpoint of the 2.0 to 4.0 percent target range until the fourth quarter of 2025. It is then projected to rise gradu-ally and peak by the second quarter of 2026 before easing back toward the midpoint starting in the third quarter, as global commodity prices stabilize.

“The risks to the inflation outlook are broadly balanced for 2025 to 2027. Upside pressures are seen to come from higher transport charges, meat prices, and electricity rates,” the BSP said.

“Meanwhile, the main downside risks are linked to the impact of lower rice import tariffs as well as the expected im-pact of weaker global demand,” it added.