Economy likely grew below target last year

Poll of economists

MANILA, Philippines — The Philippine economy likely grew at a faster pace in 2024 from a year ago, driven by robust private consumption and strong government spending, but may not hit the government’s six to 6.5 percent growth target, economists said.

UnionBank chief economist Ruben Carlo Asuncion said the country’s gross domestic product (GDP) growth likely accelerated to 6.1 percent in the fourth quarter of 2024. This would bring the full-year average to 5.9 percent.

The official GDP data for the fourth quarter and full-year 2024 will be released on Jan. 30.

Asuncion attributed the stronger fourth-quarter performance to several factors, including improved purchasing power due to disinflation and more jobs in the services and manufacturing sectors.

Remittances from overseas Filipino workers also boosted consumption amid a weak peso, while real loan growth and double-digit increases in government expenditures supported economic activity.

However, export underperformance, high vacancy rates in private construction, and the effects of the Marcos administration’s Philippine offshore gaming operator (POGO) ban weighed on fourth-quarter growth.

Philippine National Bank economist Alvin Arogo sees both fourth quarter and full-year growth at 5.8 percent.

“This rate of economic expansion is faster than 2023’s 5.5 percent, as strong government spending and its positive impact on public construction likely helped amid a high interest rate environment,” he said.

Meanwhile, BPI lead economist Jun Neri said the economy likely grew by 5.8 percent in the fourth quarter, supported by slower inflation and pre-election government spending, which surged by 20 percent.

“Investment spending may have also contributed to this, as double-digit growth in bank loans suggests that capital spending remains healthy,” Neri said.

The GDP data may also influence the timing of rate cuts from the Bangko Sentral ng Pilipinas (BSP), Neri said.”The possibility of a rate cut in February or April could increase if GDP growth falls significantly below consensus or dips below five percent.”

Neri expects the BSP to cut rates by 25 basis points twice in 2025, although uncertainties, including external risks, could affect the pace of monetary easing.

Philippine Equity Partners Inc. (PEP), the research partner of Bank of America, offered a more cautious outlook.

PEP research analyst Jojo Gonzales said he revised his full-year GDP estimate to 5.7 percent in 2024 from 5.9 percent previously, citing uneven investment spending, a larger trade deficit and spending constraints.

For 2025, Neri expects the economy to rebound by 6.3 percent, aided by election-related spending, steady remittances and low unemployment.

“With inflation now under control, consumer spending is expected to gain momentum especially for discretionary items.”