A regional think tank expects the Philippine economy to be the top performer among the members of the Association of Southeast Asian Nations and its three major trading partners, saying the easing inflation rate will boost consumer demand.
The ASEAN+3 Macroeconomic Research Office kept the growth forecast for the Philippines at 6.2 percent this year, the highest in the region. This is contained in the organization’s July update of its regional economic outlook.
It also maintained its forecast of 6.5-percent expansion for the Philippines in 2024, next to Vietnam’s 7.6 percent.
“ASEAN+3’s recovery is now riding on resilient demand within the region,” said AMRO chief economist Hoe Ee Khor.
“Recovering labor markets and falling inflation, along with steadily growing intra-regional tourism, are helping to cushion growth against sluggish external demand that is dampening the region’s exports,” Khor said.
He said inflation had decelerated across most ASEAN+3 economies due to easing global commodity prices and normalizing supply chains, allowing many of the region’s central banks to pause or ease the pace of monetary tightening. This, in turn, is bolstering consumption.
The interagency Development Budget Coordinating Committee earlier projected a 6-percent to 7-percent growth this year, saying the economy would continue to be resilient amid the headwinds coming from both the domestic and external fronts.
The country’s gross domestic product expanded by 6.4 percent in the first quarter, despite the elevated inflation and higher interest rates that impacted consumer demand.
AMRO said the ASEAN+3 region was expected to grow by 4.6 percent this year, up from 3.2 percent last year. It said while the ongoing weakness in global trade prompted a slight reduction in the ASEAN growth forecast for 2023 to 4.5 percent from April’s projection of 4.9 percent, this would be offset by improving prospects in the Plus-3 economies.
Growth is expected to ease slightly to 4.5 percent in 2024, while inflation is projected to moderate further to 2.4 percent.
Inflation in the Philippines was on a downward trajectory in the past five months, since the peak of 8.7 percent in January 2023. Inflation in June 2023 declined to 5.4 percent.
The report said absent new shocks, the region’s export performance may soon be turning a corner. The turnaround in the global semiconductor cycle, likely to begin later this year, will be a bright spot for many of the region’s exporters. Pent-up demand from more returning Chinese tourists will also provide an additional lift to growth, it said.
AMRO warned against several risks lingering on the horizon. The threat of recession in the United States and Europe, while lower now than three months ago, could not be fully dismissed, it said.
AMRO is an international organization established to contribute toward securing macroeconomic and financial resilience and stability of the ASEAN+3 region, comprising the 10 members of ASEAN and China; Hong Kong, China; Japan; and Korea.