The slower-than-expected economic growth in 2024 supports the continued monetary easing by the Bangko Sentral ng Pilipinas, Citi said Monday.
The Philippines’ gross domestic product rose 5.2 percent in the fourth quarter, resulting in a softer pace of growth in 2024 at 5.6 percent, the government’s target of 6 percent to 6.5 percent.
It said part of the reason for weaker growth came from lower inventories and the impact of several typhoons on agriculture output in the fourth quarter, while the lower expansion of household consumption was likely due to lagged effects of a still-tight monetary policy stance.
“We think the weaker-than-expected Q4’ 24 GDP growth also reflected the lagged impact of tight monetary policy stance over the two years, aside from weather-related reasons on agriculture output,” said Citi economist for the Philippines and Thailand Nalin Chutchotitham.
Citi said, however, the seasonally-adjusted GDP continued to pick up pace for the second straight quarter, while recent activity data such as bank loans, unemployment, income remittances continue to suggest that domestic demand would remain well-supported in 2025.
“We revise down 2025 GDP growth forecast slightly from 6.0 percent to 5.9 percent due to the slightly softer momentum from 2024, and maintain our expectation for 25p policy rate cuts in February, June and August 2025,” said Chutchotitham.
“We continue to expect the BSP to deliver 25 bp policy rate cut on Feb. 13 to 5.50 percent. We expect the BSP to cut again in June and August, skipping April, partly to ascertain a few outcomes, including the potential increase of US tariffs and possible impact on global trade and US dollar-Philippine peso, the Fed’s rate-cut decisions and the Philippines’ mid-term election campaigning’s potential positive impact on domestic demand,” said Chutchotitham.
Citi said recent activity data such as income remittances continue to suggest that domestic demand would remain well-supported. Commercial bank loans rose 11.1 percent year-on-year in November 2024, suggesting robust business activities and consumption growth.