S&P Global keeps Philippine GDP growth outlook for 2024, 2025

By Luisa Maria Jacinta C. Jocson, Reporter

S&P Global Ratings maintained its gross domestic output (GDP) forecast for the Philippines this year and 2025, as it expects the country to be among the top performers in the region again.

“The economy’s growth is likely to improve over the next two years. As inflation moderates further, we forecast real GDP growth to about 6% for 2024 and 2025, compared to the 5.6% for 2023,” S&P Global Ratings Director Nikita Anand said in a webinar on Wednesday.

The credit rater sees Philippine GDP averaging 5.9% this year and 6.2% in 2025, the same as the forecasts it gave in November.

Both forecasts are still below the government’s 6.5-7.5% and 6.5-8% growth targets for 2024 and 2025, respectively.

“Although low relative to the Philippines’ recent history, this is actually one of the higher growth rates in the region as forecasted at the moment,” S&P Global Ratings Senior Economist Vincent Conti said.

“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-19 (coronavirus disease 2019) years,” he added.

With the 5.9% GDP growth forecast, the Philippines is expected to be the second-fastest growing economy in the region this year, behind only Vietnam (6.1%). It is ahead of Indonesia (4.9%), Malaysia (4.3%), Thailand (3.9%) and Singapore (2.2%).

For 2025, the Philippines also has the second-fastest projected growth in the region, after Vietnam (6.7%).

Last year, the economy grew by a weaker-than-expected 5.6%, failing to meet the government’s 6-7% goal.

Mr. Conti said that the economy is still feeling the impact of elevated inflation and weaker investments.

“Last year’s high inflation is likely to still weigh on consumption this year as last year’s prices would have eaten into disposable income and savings,” he said.

“The second headwind is the deceleration of investment last year, which we continue to expect to decelerate even further this year and that’s really due to the lagged impacts of the rate hikes. Investment is also going to be weighed by the aforementioned slower consumption,” he added.

S&P Global maintained its inflation forecast for the Philippines at 3.4% this year, slightly lower than the Bangko Sentral ng Pilipinas’ (BSP) 3.6% projection this year.

The credit rater sees inflation settling at 3.2% in 2025, in line with the BSP’s expectation.

“We’re already seeing inflation drop back into the BSP’s target range, where we expect that to continue to be the case for this year… that gives the BSP some leeway to be able to consider starting to cut rates,” Mr. Conti said.

“We also believe policy rates could decrease in 2024 as inflation stays moderate. Our base case is a 75 basis-point (bp) reduction in the second half of this year,” Ms. Anand added.

The BSP has kept its benchmark interest rate at a near 17-year high of 6.5% for three straight meetings. It raised borrowing costs by 450 bps from May 2022 to October 2023.

BSP Governor Eli M. Remolona, Jr. earlier said he expects to begin cutting rates “in the next few meetings.”

The Monetary Board is scheduled to meet on April 8.