Filipinos remained resilient despite the challenges that defined 2024, both locally and globally.
Major events, trends, and developments shaped the Philippine economy this year, and they are expected to continue affecting Filipino businesses and households next year. From elevated inflation and interest rates to stock market volatility and foreign exchange fluctuation to global conflicts and extreme temperatures that shook commodity prices, challenges were aplenty to keep the Philippines from achieving its goals this year.
Despite these hurdles, the economy has shown remarkable resilience this year, according to National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan. The gross domestic product grew 5.8 percent in the first three quarters of 2024, surviving the prolonged dry season due to El Niño and the consecutive strong typhoons amid La Niña.
“Notwithstanding these disruptions, our growth rate still positions us as one of the fastest-growing economies in Asia. It is a testament to our people’s hard work and dedication and the sound policies implemented by our government despite such challenging conditions,” Balisacan said.
NEDA is optimistic about the fourth-quarter economic performance, with holiday spending, more stable commodity prices, and a robust remittance inflow and labor market fueling confidence that the 6-percent to 6.5-percent updated growth target remains within reach.
“We expect the Philippine economy to bounce back during the last quarter, given the anticipated increase in holiday spending, continued disaster recovery efforts, low inflation, and a robust labor market,” the Development Budget Coordination Committee (DBCC), which is composed of the government’s economic managers, said.
Inflation averaged 3.2 percent from January to November 2024, within the government’s target range of 2 percent to 4 percent for the year.
With inflation expected to stay comfortably within the target range, the Bangko Sentral ng Pilipinas (BSP) reduced policy rates by a cumulative 50 basis points and cut the reserve requirements to boost liquidity to spur growth in private spending, particularly on big-ticket consumer items and investments in capital-intensive infrastructure.
This move is expected to support economic growth by making borrowing more affordable for businesses and consumers.
The labor market is also robust, with the unemployment rate at 3.9 percent as of October 2024.
S&P Global Ratings upgraded its outlook on the Philippines to positive from stable, reflecting the economy’s above-average growth potential and the significant improvements.
“We believe the strengthening of the country’s institutional settings, which had contributed to a significant enhancement in the sovereign’s credit metrics over the past decade, will continue. This is demonstrated by the strong economic recovery in the last two years, and ongoing reforms to support business and investing conditions,” S&P said in its report, adding that the ratings may be raised “if the government achieves more rapid fiscal consolidation.”
Department of Budget and Management Secretary Amenah Pangandaman expressed confidence “we can achieve an ‘A’ rating for all credit rating agencies.”
Department of Finance Secretary Ralph Recto, meanwhile, is optimistic about the Philippines’ economic prospects in 2025, fueled by the recent enactment of several laws in recent months, such as the CREATE MORE Act, the VAT Refund Mechanism for Foreign Tourists, and the Amendments to the Agricultural Tariffication Act.
“It is high time that the Philippines catches up with countries around the world that have long implemented a standard VAT refund system. This strategic initiative aims to encourage foreign tourists to spend more in our country, stimulating our domestic economy. With increased tourism spending, we will have higher revenues to collect and we can create more jobs, raise incomes, and accelerate economic growth,” Recto said.
Balisacan said the Philippines has a good chance of attaining upper middle-income country (UMIC) status by 2025.
“Attaining this status will require that we achieve our growth target this year, that we maintain our growth trajectory in 2025, and our currency will not weaken significantly relative to the currencies of our major trading partners,” he said.
Balisacan said the goal of reducing nationwide poverty to a single-digit rate by 2028 remains achievable. “Despite high inflation, we have already made remarkable strides, with poverty falling to 15.5 percent in 2023 from 18.1 percent in 2021. Maintaining low and stable prices is critical to reducing poverty and making economic growth more inclusive. We will continue to enhance our social protection programs, particularly through digital solutions enabled by the National ID, to protect our gains and ensure that no one is left behind,” he said.
The DBCC updated the growth assumptions for 2025 to 2028 to reflect a wider band of 6 percent to 8 percent.
“To achieve these targets, we remain committed to implementing reforms outlined in the Philippine Development Plan 2023–2028. These include accelerating infrastructure investments, enhancing the ease of doing business, and boosting national competitiveness,” it said.
“We will also soon implement one of our growth-enhancing legislative measures—Republic Act No. 12066 or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy [CREATE MORE]—which will support businesses, attract foreign investments, and spur higher economic growth,” it said.
This law is expected to support the government’s finances. From January to October 2024, revenue collections grew 16.8 percent to P3.77 trillion and are expected to reach P4.383 trillion (16.5 percent of GDP) by end-2024.
Government spending is expected to hit P5.908 trillion (22.3 percent of GDP) by the end of the year.
“As a centerpiece for sustaining our high growth trajectory, we will maintain infrastructure spending at 5 percent to 6 percent annually over the entire plan period. Aside from infrastructure development, we will also invest heavily in our human capital and in programs and projects that promote social and economic transformation, in line with the PDP 2023-2028,” the DBCC said.
The government expects to bring down the budget deficit from 5.7 percent of GDP in 2024 to 3.7 percent of GDP in 2028 on the back of fiscal discipline and prudent debt management.
The economic managers said that by pursuing a whole-of-government and a whole-of-society approach, “the DBCC will remain steadfast in sustaining the country’s high-growth trajectory and managing inflation, accelerating the implementation of well-targeted social services and structural reforms that will enable us to achieve our goal of reducing poverty incidence and decreasing unemployment rates.”
