THE Philippine economy is seen to grow at 5.9 percent for 2024 despite growing the fastest in the Asean region by 5.6 percent in 2023, according to international credit watcher S&P Global Ratings which kept its real GDP forecast unchanged.
In a webinar on Wednesday, S&P Asia Pacific economist Vince Conti said Philippine growth will be a “tad under” this year at about 5.9 percent then at 6.2 percent for 2025.
“Our outlook is for the Philippines to do relatively well compared to the region, but kind of a little bit under where growth has been in the recent few years, especially outside of the Covid years,” Conti said.
There are two main headwinds that will keep the growth rate “relatively low,” Conti said: last year’s high inflation and deceleration of investments.
It will take some time for consumers to recover from last year’s headline inflation rate of 6.0 percent and its impact on income and savings, he added.
Investments are also expected to decelerate further this year due to the lagged impact of the rate hikes, according to Conti.
On the positive front, Conti said exports may be bottoming out led by services and electronics, adding that a low base from last year will help.
Inflation, meanwhile, is expected to be at 3.4 percent for 2024 and 3.2 percent for next year.
The S&P economist said they see inflation dropping back into the Bangko Sentral ng Pilipinas’ (BSP) target range and they expect it to continue this year.
This, Conti said, gives the country’s central bank “some leeway” to consider cutting rates as S&P expects the BSP to cut rates cumulatively by 75 basis points by the end of the year.
The BSP’s inflation target range has been retained at 3.9 percent for 2024 to 2028 set by the Development Budget Coordination Committee (DBCC).
The credit rating agency also expects the Philippines’ policy rate at 5.75 percent by the year-end of 2024 from last year’s 6.50 percent.
“We would expect some Asia-Pacific central banks to start cutting rates in a few months even if the US Fed delays its first cut further,” it said.
Finance Secretary Ralph G. Recto, who is also a member of the Monetary Board, said the BSP could cut interest rates by 50 basis points this year.
“Possibly, 50 basis points. Maybe two [cuts]. I’m not making a decision. There’s a board. I’m just expecting,” Recto said.
The BSP’s Monetary Board kept its benchmark interest rates at a 16-year high of 6.5 percent during its first rate-setting meeting in February.
Image credits: Nonie Reyes