The Bangko Sentral ng Pilipinas has admitted that government is unlikely to meet its gross domestic product growth target this year.
BSP Governor Benjamin Diokno said growth would be anywhere between 4 and 5% this year. This is lower than the 6 to 7% GDP goal for the year.
The BSP expects growth to accelerate to a range of 7 to 9% next year.
“The Philippines’ economic fundamentals remain sound. While the pandemic poses challenges in the short term, the country continues to enjoy bright medium- and long-term growth prospects,” Diokno told clients of Japan’s Nomura.
Every percentage point drop in GDP growth means a P14.7-billion reduction in revenue collection that will mean additional borrowings and higher interest expenses.
According to the BSP, inflation will also exceed the 2 to 4% target this year because of supply factors that cannot be addressed by monetary policy.
The BSP said a manageable inflation would provide the environment for investments, job creation, and growth.
Higher inflation, however, will balance the impact of the reduction in revenues from lower growth as every percentage point increase in inflation results in an additional P11.2 billion revenue for government. (Eileen Mencias)