Citi bullish on Philippine economy, banking sector

MANILA, Philippines — Global financial giant Citi remains optimistic about the Philippine economy, projecting robust growth and highlighting the country’s strong banking sector as well as competitive advantages in outsourcing.

Amol Gupte, head of South Asia and ASEAN at Citi, said that the Philippines may post a strong economic growth over the next few years.

“We think the Philippines is primed for great growth. Philippines (may grow) close to six percent in 2024. We expect growth in 2025 to stay within the six percent handle,” Gupte said in a hybrid press conference yesterday.

The Philippine economy expanded by 5.2 percent in the third quarter of 2024, slower than the previous quarter’s 6.4 percent growth. For the first three quarters, the country’s gross domestic product (GDP) averaged 5.8 percent.

Economic managers are targeting a GDP growth of six to 6.5 percent in 2024 and six to eight percent in 2025 up to 2028.

According to Gupte, the Philippines has a unique position in global supply chains, especially in services outsourcing.

“The Philippines will continue to benefit from (services outsourcing) and will create a lot of jobs. Moving up the value chain in global capability centers will ensure the Philippines plays a larger role, along with countries like India,” he said.

However, Gupte also warned of potential challenges, particularly the impact of artificial intelligence (AI) on the business process outsourcing (BPO) industry.

“There’s the risk of what AI will do to that industry and whether that will reduce jobs. So I think it’s really important that the Philippines moves up the value chain to retain jobs and attract more middle-office roles beyond the voice jobs that currently dominate the industry,” he said.

Meanwhile, Gupte commended the strong balance sheets and low levels of non-performing loans (NPLs) of Philippine banks.

However, profitability this year will depend heavily on global interest rate movements.

He said that recent fluctuations in longer-tenor rates and inflation trends in the US could influence the rate environment in the Philippines, given the local banks’ reliance on interest income.

K Balasubramanian, Citi’s head of corporate banking for South Asia, said the recent upgrades in the country’s sovereign credit rating have a positive impact on the financial profile of Philippine banks.

“It means that the country’s ability to access international financing is going to be better and even the cost of the access is going to be better than what it was in the past,” he said.

“So I think the financial profile of the Filipino banks continue to be very strong, and with six percent growth, I think they are well capitalized to look at the opportunities ahead,” Balasubramanian said.