January 27, 2025 | 12:00am
Economic Optimism: Philippines Shows Robust Growth in 2024
The Philippine economy is expected to have expanded more rapidly in 2024 compared to 2023, fueled by robust private consumption and strong government spending. However, experts anticipate that these growth rates may not reach the Philippine government’s target of 6 to 6.5 percent.
UnionBank Economist Forecasts 5.9% Full-Year Growth
Ruben Carlo Asuncion, chief economist at UnionBank, predicts that the country’s gross domestic product (GDP) rose by 6.1 percent in the fourth quarter of 2024, leading to an annual average of 5.9 percent for the year. This expected growth reflects a significant improvement over 2023’s 5.5 percent expansion.
Factors Driving Economic Performance
Several key factors are credited for the stronger fourth-quarter performance. Improved purchasing power resulting from reduced inflation rates, alongside an increase in employment in both the services and manufacturing sectors, has bolstered economic activity. Remittances from overseas Filipino workers also provided additional income, facilitating consumption despite the weak peso.
Government spending is another critical driver, with real loan growth and substantial increases in government expenditures fueling economic expansion. This positive influence on public construction is especially notable despite the presence of high interest rates.
Challenges to Growth
However, not all sectors are experiencing gains. Export growth is lagging, and vacancy rates remain high in the private construction sector. Moreover, the Marcos administration’s ban on Philippine offshore gaming operators (POGOs) continues to exert negative effects on the economy.
Other Economists Concur
Alvin Arogo, economist at Philippine National Bank, agrees with Asuncion’s forecast. He projects 5.8 percent growth for both the fourth quarter and the full year of 2024. According to Arogo, the improved economic performance can be attributed to strong government spending and its beneficial impact on public construction, offsetting some of the challenges posed by high interest rates.
Jun Neri, lead economist at BPI, also anticipates 5.8 percent growth in the fourth quarter. He cites reduced inflation and increased government spending as primary contributors to the economic expansion. Pre-election spending rose by 20 percent, supporting overall activity levels.
Implications for Monetary Policy
The GDP figures are expected to play a significant role in determining the timing of rate cuts by the Bangko Sentral ng Pilipinas (BSP). Neri suggests that a rate cut could be implemented in February or April if GDP growth is significantly below expectations or falls below five percent. Neri projects two rate cuts of 25 basis points each in 2025, though external risks could influence the timing and magnitude of monetary easing.
Cautious Outlook from PEP
Philippine Equity Partners Inc. (PEP), the research partner of Bank of America, provides a more cautious outlook. They anticipate that consumer spending will accelerate, particularly for discretionary items, as inflation remains under control.
Conclusion
In summary, while the Philippine economy is poised for growth in 2024, it may not reach the government’s ambitious target of 6 to 6.5 percent. Strong private consumption and robust government spending are driving this expansion, but challenges like export underperformance and the POGO ban remain key concerns. The GDP figures expected from the BSP on January 30 will provide a clearer picture of the economy’s performance and could influence future monetary policy.
We invite you to share your thoughts on this economic outlook. Join the discussion and share your insights on the potential growth trajectory of the Philippine economy in the comments section below.
