PIDS issues PHL growth estimate of 5.8%-6%, citing weaker inflation

THE Philippine Institute for Development Studies (PIDS) expects the economy to expand between 5.8% and 6% this year, citing the weakening of inflation.

Gross domestic product (GDP) expansion was 5.2% in the third quarter, due to climate disturbance and a slowdown in public spending.

The year-earlier growth rate had been 6%.

“As base effects subside and based on recent and foreseeable developments in the Philippine economy, we estimate a year-on-year GDP growth for 2024 to pick up to between 5.8% to 6.0%,” PIDS said in a report.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan has said that GDP must grow 6.5% in the fourth quarter to meet the lower end of the government’s 6-7% target this year.

“GDP growth’s trajectory for the fourth quarter of 2024 will be impacted by a series of scenarios following slower inflation expectation: relaxation of policy rates that will drive firms to borrow more to expand business operations contributing to the recovery of employment, thereby increasing household purchasing power and consumption,” it said.

The report said the “nexus” of slower inflation, employment gains, and renewed consumption due to the holidays and elections can stimulate GDP growth.

GDP growth for 2025 is forecast at 6.1%, PIDS said.

It said the downside risks include “geopolitical threats, deteriorating economic conditions of key partners, and the worsening of overall external conditions.”

“Headline inflation will likely slow to 3.6% on average in 2024, from the 6.0% average in 2023, then settle to within the target range (of 2-4%) in 2025,” PIDS said.

The report said food prices are the main driver of inflation due to supply-chain constraints and disruptions to agricultural production due to calamities.

Headline inflation picked up to 2.3% in October from 1.9%, bringing average inflation in the 10-month period to 3.3%, still within the BSP’s 2-4% target but above the 3.1% full-year forecast.

In its review of recent growth data, PIDS said failure to grow towards the high end of the target band means the Philippines could fail to become an upper middle-income economy by 2025.

“It is still possible although at a much later period (towards) the latter part of 2025 or early 2026,” it said, adding that the conditions for that happening include growth “of as much as 8% with the exchange rate not depreciating much beyond the P58-to-the-dollar mark,” it said. — Aubrey Rose A. Inosante