Based on the recent findings of Citigroup, Inc., the growth domestic product (GDP) of the Philippines will grow at a lower-than-expected rate until 2025, according to a BusinessWorld news report.
To put things in perspective, posted below is an excerpt from the BusinessWorld news report. Some parts in boldface…
THE Philippines’ gross domestic product (GDP) is likely to expand slower than the government’s target until 2025, Citigroup, Inc. (Citi) said.
Citi cut its GDP growth forecast for the Philippines to 5.8% this year but kept its 6% growth forecast for 2025. This is below the government’s 6-7% target this year and 6.5-7.5% goal next year.
“We lowered 2024 GDP growth slightly from 6% to 5.8%, mainly due to a weak third-quarter outturn that had been a result of several temporary, weather-related factors,” Citi economist for Thailand and the Philippines Nalin Chutchotitham said in a report.
The Philippine economy slowed to 5.2% in the July-to-September period from 6.4% in the second quarter and 6% a year ago. This was also the weakest growth since the 4.3% expansion in the second quarter of last year.
“Nonetheless, we think it would be misleading to view the weaker third-quarter expansion as the start of a slowdown as several negative factors in the third quarter are one-off events,” Ms. Chutchotitham said.
She said the weakness in third-quarter economic growth mainly stemmed from the drop in agriculture production, construction activity and net exports.
Despite the weak third quarter, Citi expects growth to accelerate in the fourth quarter as domestic demand is seen to pick up due to easing inflation and lower rates.
“We expect fourth-quarter 2024 GDP growth to accelerate to 6% year on year. Household consumption is expected to continue improving, supported by lower interest rates and improved consumer sentiment as inflation continues to stabilize.”
In the first nine months, GDP grew by 5.8%. The economy would need to grow by at least 6.5% in the fourth quarter to meet the lower end of the government’s 6-7% target.
“With the storm season passing soon, we also expect infrastructure projects’ progress to proceed at a faster clip in the fourth quarter and first quarter of 2025,” Ms. Chutchotitham said.
Domestic demand will also likely be sustained by improving employment conditions, remittance growth and bank lending.
“The RRR (reserve requirement ratio) cut of 250 basis points (bps), effective on Oct. 25, would also release more liquidity into the banking system and likely continue to support strong credit expansion,” Ms. Chutchotitham added.
The central bank last month reduced the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 bps to 7%.
“We also maintain our expectation of 6% growth in 2025 but see some upside risks due to tailwinds from more rate cuts,” Citi said.
The Bangko Sentral ng Pilipinas (BSP) will likely cut by 25 bps in December and by a total of 75 bps next year, according to Citi.
This year so far, the central bank has reduced interest rates by 50 bps since August. The Monetary Board is set to hold its last rate-setting meeting of the year on Dec. 19.
Let me end this post by asking you readers: What is your reaction to this recent development? Do you think the economy of the Philippines still has enough momentum to exceed the 4th quarter growth targets of economists?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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