The Philippine economy could still expand by 5%-6% in 2027 if inflationary pressures subside, El Niño risks are kept in check, and consumer and business confidence recovers, the Department of Economy, Planning, and Development (DEPDev) said. The range is the government's official growth target, the assumption that anchors its development and fiscal planning.

DEPDev Secretary Arsenio M. Balisacan said achieving the government's growth target for 2027 would depend in part on easing price pressures and managing the potential impact of the El Niño weather phenomenon, which typically brings drier-than-normal conditions to the Philippines.

Recent declines in fuel prices, he noted, could help bring inflation down.

"The prices of fuels have dropped sharply and we hope that that will continue because that will substantially lessen the inflation pressure," he said. "Of course the lagged effects of previous increases, we will feel it in November and December, but at least the extra pressure has been reduced and we can work on to address the remaining supply bottlenecks."

Mr. Balisacan also acknowledged uncertainty over how severe El Niño will prove to be.

"We are hoping that it's not as bad as it was initially painted and we are preparing for that, but it's hard to prepare when there is a lot of uncertainty," he told reporters on the sidelines of the 64th Philippine Economic Society Annual Meeting and Conference. "But we are doing our best given our experiences in the past dealing with El Niño."

Citing previous episodes, he said El Niño has historically had a relatively limited direct impact on economic growth, particularly as agriculture now accounts for a smaller share of output. Even so, higher food prices could still weigh on consumer sentiment and overall demand, with consequences for the broader economy.

"If the food prices are affected, it's not just the agriculture sector that's affected but again, those high prices could feed into the consumer sentiment, affect overall demand. So, overall effects are still big," he added.

Confidence and External Risks

Restoring consumer and business confidence would be critical to the recovery, Mr. Balisacan said, as weak sentiment could drag on consumption, investment, and trade — a key concern for an economy where household spending has long been the largest single component of output. He also flagged lingering external risks, noting that the World Bank and the International Monetary Fund have downgraded their global growth outlooks compared with six months earlier.

"I think those are the ones that are fundamental in whether we will be able to meet the target of 5-6%," he said. "But if we can manage to get the economy revived, grow faster than in 2026, I think that is a good signal that will change a lot of sentiment about the economy."

Weak 2026 Growth

The remarks come after the Philippine economy grew by just 2.1% in the third quarter, slowing from the 4% expansion in the same period last year and the revised 2.4% recorded in the second quarter. That brought growth for the first nine months to 2.5%, below the 4.9% posted in the year-earlier period and short of the government's 3.5%-4.5% full-year target.

Mr. Balisacan earlier said the economy would need to expand by around 6.3% in the fourth quarter just to reach the lower end of the government's annual target.

2027 Target Under Review

Economic managers have yet to decide whether to recommend revising the 5%-6% growth target for 2027, pending a review of economic conditions and other assumptions.

"I'm not saying that yet. I want to listen to our colleagues. I want to see the data also as well," Mr. Balisacan said when asked whether next year's growth target needed no adjustment.

He said the review would also take into account the external environment, revenue prospects, and the impact of new legislative measures on government finances.

Mr. Balisacan warned that weaker-than-expected growth could hurt revenue collections and complicate the government's fiscal consolidation program, its effort to keep the budget deficit on a sustainable path.

"If the growth is really low, then you have to manage the flow of spending because otherwise your deficit can go uncontrolled," he said. He added that the government would need to prioritize productive, high-quality projects to support economic growth while managing fiscal constraints. Attention will now turn to the fourth-quarter growth data and the findings of the economic managers' review, which will shape any recommendation on whether to keep or adjust the 5%-6% goal for 2027.

Source: BusinessWorld