By Luisa Maria Jacinta C. Jocson, Reporter
PHILIPPINE ECONOMIC GROWTH is seen to stay subdued within the close to time period amid sluggish fiscal consolidation and weakening remittances, Capital Economics stated.
“GDP (gross home product) progress within the Philippines slowed once more within the second quarter of the yr, and we anticipate the economic system to stay weak over the approaching quarters,” Capital Economics Senior Asia Economist Gareth Leather-based and Economist Placement Pupil Harry Chambers stated in a report.
Capital Economics expects GDP to develop by 5.1% this yr and 5.5% in 2025, which might each miss the federal government’s 6-7% and 6.5-7.5% targets, respectively.
The Philippine economic system grew by 6.3% within the April-to-June interval, the quickest in five quarters.
As a way to meet the decrease finish of the federal government’s goal, the economic system would want to develop by at the very least 6% within the second half.
“Tighter fiscal coverage and weakening remittances will weigh on financial progress within the Philippines,” it added.
Newest information from the central financial institution confirmed that money remittances rose by 2.9% to $19.332 billion within the first seven months. The BSP expects remittances to develop by 3% this yr.
“Fiscal coverage can also be prone to maintain again progress. The federal government is aiming to scale back authorities debt, which shot up through the pandemic, to extra sustainable ranges,” Capital Economics stated.
Capital Economics additionally cited different dangers to its progress outlook, together with the tensions between China and the Philippines.
“The worsening relationship between the Philippines and China poses a draw back threat to the outlook. Nonetheless, the truth that the Philippines isn’t intently built-in into China’s economic system means the fallout must be restricted.”
For 2026, Capital Economics sees Philippine progress to common 6.5%, which is on the low-end of the federal government’s 6.5-8% goal.
In the meantime, S&P World Scores in a separate report stated it “nudged down” the Philippines’ progress forecast.
It trimmed its GDP projection for the Philippines to five.7% this yr from 5.8% beforehand.
“Southeast Asian progress has remained usually strong, benefiting from the export restoration and sturdy home demand,” S&P World Scores Asia-Pacific Chief Economist Louis Kuijs and Asia-Pacific Senior Economist Vishrut Rana stated.
S&P’s progress forecast for the Philippines this yr makes it the third-fastest economic system within the Asia-Pacific area, after India (6.8%) and Vietnam (6.2%).
Nonetheless, it raised the Philippines’ progress forecast for 2025 to six.2% from 6.1% earlier. This nonetheless locations it because the nation with the third-fastest projected progress, after India (6.9%) and Vietnam (6.8%).
“Asia-Pacific progress stays largely intact, pushed by a continued export restoration and, in most rising markets (EMs), strong home demand,” it stated.
The credit score rater now additionally sees Philippine progress averaging 6.4% in 2026 and 6.5% in 2027.
LOWER INFLATION
In the meantime, Capital Economics famous that easing inflation and decrease rates of interest ought to fortify home demand.
“We anticipate inflation to stay subdued over the approaching months, helped by a mix of weak progress, helpful base results and authorities efforts to spice up the availability of agricultural items,” Capital Economics stated, because it sees inflation settling at 3.3% this yr.
In the meantime, S&P World expects inflation to common 3.4%, in step with the central financial institution’s personal projection.
Capital Economics additionally expects the Bangko Sentral ng Pilipinas (BSP) to additional cut back rates of interest.
“With financial progress set to wrestle and inflation prone to keep subdued, we anticipate additional charge cuts by the central financial institution over the approaching months,” it added.
The Financial Board delivered a 25-basis-point (bp) charge lower final month, its first time lowering charges in almost 4 years. There may very well be one other 25-bp lower within the fourth quarter, BSP Governor Eli M. Remolona, Jr. earlier stated.
Capital Economics forecasts the BSP to chop by 75 bps this yr and finish the coverage charge at 5.75%. It additionally sees 100 bps price of cuts subsequent yr to convey the important thing charge to 4.75%.
In the meantime, S&P World expects the benchmark charge to finish at 5.5% this yr and 4.25% in 2025.
“Regional central banks have nonetheless usually shunned reducing coverage charges. The Philippines, New Zealand, and Indonesia have been exceptions; charge setters there have lately agreed on cuts of 25 bps,” S&P World added.
RRR
In the meantime, HSBC World Analysis stated that the latest reserve requirement ratio (RRR) lower is not going to impression the BSP’s coverage easing cycle.
“Although the RRR lower does enhance the funding flexibility of banks (which can be understood as a type of easing), we don’t suppose the RRR lower significantly alters the financial coverage outlook, nor does it tilt the possibilities of an October charge lower,” HSBC economist for ASEAN (Affiliation of Southeast Asian Nations) Aris D. Dacanay stated in a report.
“We don’t suppose it is a change within the BSP’s financial stance for the reason that liquidity injected could be re-absorbed by the BSP by its invoice issuances.”
HSBC expects the RRR lower to inject P450 billion into the economic system initially.
Beginning Oct. 25, the BSP will cut back the RRR for banks and nonbank monetary establishments with quasi-banking features by 250 bps to 7% from 9.5%.
Mr. Dacanay famous that the BSP’s latest alerts present they don’t seem to be in a rush to loosen financial settings.
“This has additionally been our long-held view. However with the Fed reducing by 50 bps (final week), we expect the chance of the BSP reducing by 50 bps in 4Q 2024 additionally elevated,” he stated.
“What issues nonetheless for financial coverage is inflation and progress. We proceed to anticipate the BSP to comply with a data-dependent method. With dangers to inflation tilted to the upside for September as a result of Hurricane Yagi, we anticipate the BSP to maintain its easing cycle at a gradual tempo, solely reducing by 25 bps in December.”
