Philippines may grow 5.8% next year

MANILA, Philippines — Nomura Global Markets Research said the Philippines is expected to emerge as one of Asia’s rising stars despite the expected below six percent gross domestic product (GDP) growth next year.

In its Asia Macro Outlook 2024, Nomura said the Philippines’ gross domestic product (GDP) growth may accelerate to 5.8 percent next year after slowing to 5.2 percent this year.

“Over the medium term, we see India, Indonesia and the Philippines as Asia’s rising stars,” Nomura research analysts Sonal Varma and Si Ying Toh said.

Ahead of the mid-term elections in 2025, Nomura said increased fiscal spending should lead to higher GDP growth.

“Public investment spending will be the key driver of the pick-up, in our view, reflecting more progress in coming quarters on the government’s flagship infrastructure projects after a disappointing start to 2023. The central government is pushing catch-up spending plans and implementation should also be sustained ahead of the May 2025 mid-term elections,” Nomura said.

The GDP growth of Asian economies is seen slowing to 3.9 percent in 2024 from the projected 4.7 percent expansion this year.

“In particular, Asia’s striving tiger cubs – India, Indonesia and the Philippines – are likely to be the fastest growing economies this decade. They have been scaling up structural reforms to address infrastructure gaps, strengthen regulations and improve competitiveness,” they said.

With ample room for economic development catch-up and superior working-age populations, Nomura said these economies are poised to attract stronger foreign direct investment and portfolio inflows, potentially setting off a virtuous cycle where higher investment leads to stronger economic growth, which in turn attracts more investment.

The Japanese bank believes growth in most Asian economies will outperform that of US and Europe in 2024, due to a semiconductor-led export tailwind and domestic offsets that should facilitate a soft landing in Asia.

“We see Asia entering its sweet spot in early 2024, due to the chip cycle recovery, but see a more challenging second half of the year, as the US recession unfolds,” the authors said.

They said,  inflation divergence would be an important theme, with last-mile challenges in Australia and Singapore juxtaposed against headline deflation in Thailand.

“We expect a monetary policy pause through the first quarter to give way to rate cuts starting in the second quarter of 2024, although Asia will likely deliver less cumulative easing than the Fed in this cycle,” they said.

Nomura  lowered its inflation forecasts for the Philippines to six percent from 6.2 percent for this year and to 3.5 percent from 3.8 percent for next year after quickening to 5.8 percent in 2022 from 3.9 percent in 2021.