The ASEAN MacroEconomic Research Office (AMRO) reduced its 2024 growth forecast for the Philippines to 6.1 percent from 6.3 percent on lower-than-expected first-quarter economic performance.
“We have shaved it down from 6.3 percent to 6.1 percent, which is in light of the data that comes out in the first [quarter] of the year. So as I said before, we are always looking at the data very closely and reviewing them” AMRO chief economist Hoe Ee Khor said in a briefing for the group’s July 2024 quarterly update.
The gross domestic product (GDP) of the Philippines expanded 5.7 percent in the first quarter, below the government’s target range of 6 percent to 7 percent for the year.
AMRO also cut the 2025 GDP growth outlook for the Philippines to 6.3 percent from 6.5 percent. The group said this might be further revised depending on the data in the second half of 2024.
It said the infrastructure gap is one of the weaknesses of the Philippine economy. “I think the government is very conscious of that and is trying to fill the gap. Unfortunately, I think the fiscal space has been used up to some extent during the pandemic, but our assessment is that there’s still a moderate business space in the Philippines and that they need to probably get more foreign investments to help complement domestic savings,” Khor said.
Khor said the investment climate in the Philippines remained more restrictive than other countries in the region. “We see there are some steps they can take to liberalize the measures and manage to attract quite a bit of investments in the first half of this year. We think the policy measures by the government will continue to attract more investment, and also the improvement in infrastructure gap will help to lift the growth potential,” Khor said.
Khor said the Bangko Sentral ng Pilipinas, along with other central banks in the region, were waiting for the US Federal Reserve to move first before touching the interest rates.
“Central banks are holding back because the exchange rate is pretty weak, but they are all weakening together mostly, so there is no issue of competitiveness and the pass-through from lower exchange rates into higher price is also very low. So as a result, central banks are waiting because after all, growth is pretty strong. So there’s a reason for the central bank to cut rates to support the growth,” Khor said.
AMRO expects inflation rate in the Philippines to moderate to 3.3 percent in 2024 from its previous estimate of 3.6 percent and from the actual 6.0 percent in 2023. Inflation in 2025 is expected to settle at 3.1 percent.
AMRO kept its 2024 to 2025 growth forecasts for the ASEAN+3 region broadly unchanged at 4.4 percent and 4.3 percent, respectively, in its latest quarterly update.
“The overall balance of risks to the region’s outlook has improved since April,” said AMRO chief economist Hoe Ee Khor. “Real estate aside, China’s economy continues to grow robustly. Tourism has rebounded close to pre-pandemic levels for most economies in the region, and the global semiconductor recovery is broadening to benefit more economies and sectors in ASEAN+3.”
