THE proposed P100 wage increase would have a negative impact on growth prospects, inflation expectations and labor market conditions, a top official of the National Economic Development Authority (NEDA) said.

"We are trying to work very hard to sustain the momentum in reducing inflation to a target of 2 to 4 percent, and the last thing we want is to reverse those gains we have achieved for the last several months," Socioeconomic Planning Secretary Arsenio Balisacan said during the "SNAP Conversations 2024: Economic Outlook" event on Thursday.

Socioeconomic Planning Secretary Arsenio Balisacan.

Inflation has already settled within the Bangko Sentral ng Pilipinas' target range at 2.8 percent, but with the wage hike, it could go higher again at around 0.2 to 0.8 percentage point (ppt).

Balisacan also stressed that the country's gross domestic product (GDP) growth will be affected.

"Our GDP estimate shows that GDP growth could be hit negatively. It's something like a 0.1- to 2.5-ppt reduction in GDP depending on how it is implemented," he said.

The NEDA chief added that about 0.1 to 0.5 ppt if the lower number "assumes the wage will be applied to minimum wage earners, but if there are cascading effects on that to other workers, then it would go as high as 2.5-ppt reduction in the GDP and that's quite substantial."

Growth hit below the 6.0- to 7.0-percent target of the government last year at 5.6 percent.

Balisacan said that the economic managers are already reviewing the possibility of revising the growth targets for the medium term.

Last year, the Development Budget Coordination Committee revisited the government's medium-term macroeconomic assumptions, revising the 2024 growth outlook to 6.5 to 7.5 percent, with the previous 6.5 to 8 percent now limited to 2025-2028.

Moreover, Balisacan also stressed that this could affect the recent gains in the unemployment rate, raising the number to 0.2 to 0.7 ppt and will amount to something around 100,000 to 340,00 additional unemployed people.

The unemployment rate dipped to 3.1 percent in December last year, the lowest jobless rate recorded since 2005, translating to 1.60 million Filipinos. Full-year unemployment registered at 4.3 percent was down from 5.4 percent in 2022.

"We are not saying that we are against any increases in wages, in fact, we would want some improvement in wages, but we would rather have those wages negotiated on the regional level," Balisacan explained.

Meanwhile, Colegio De San Juan de Letran Graduate School economist Emmanuel Lopez said that while the proposed wage hike may increase the inflation rate, "the increase will more than support the presumed increase in prices."

Unlike the current situation where the consumer has no purchasing power to support them, Lopez stressed that the wage hike would help them with their spending.

"With additional purchasing power to support the consumers, what will benefit most is our GDP where at least 70 percent of its growth comes from consumer spending, considering that ours is a consumer-driven economy," he said.