Below-target growth likely in 1st half of 2025

Philippine economic growth is likely to fall short of the government’s target in the first two quarters, GlobalSource Partners said.

“Our assessments show that GDP (gross domestic product) may be expected to increase within a narrow band over the next two quarters — rising from just above 5.7% in first quarter to approximately 5.9% in second quarter,” GlobalSource country analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said in a report.

This would be below the Development Budget Coordination Committee’s (DBCC) 6-8% target band until 2028.

GlobalSource’s first-quarter growth forecast of 5.7% would be slower than the 5.8% print in the same period in 2024.

For the second quarter, GlobalSource’s 5.9% GDP growth projection would be slower than the 6.4% print in the same period in 2024.

“This modest upward trend is driven by resilient historical GDP performance, growth in the services sector, and short-term USD/PHP exchange rate effects,” GlobalSource said.

However, local and geopolitical risks may affect the growth outlook in the first half.

“If both domestic and geopolitical shocks occur in a big, adverse way, they could unsurprisingly alter the outcome of this initial analysis,” GlobalSource said.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan earlier this month said government growth targets may need to be revisited amid rising global economic uncertainty.

“It’s too early to change at this point but we need to be watchful and be flexible because of this uncertainty,” he said.

A DBCC meeting is scheduled to be held at the end of March.

Budget Secretary and DBCC Chair Amenah F. Pangandaman has said that the committee historically keeps its target unchanged during the first and second quarters of the year.

Earlier, Finance Secretary Ralph G. Recto said that “6-6.5% [growth] is doable for 2025.”

However, GlobalSource said the Philippine economy should grow faster than the DBCC’s 6-8% target.

“The economic scarring of the pandemic actually requires the Philippines to grow by much more than the targeted growth rates of 6-8% through the end of the Marcos administration. Persistent poverty and income inequality are additional imperatives to grow by much more,” it said.

During the MAP Economic Briefing and General Membership Meeting on March 12, Mr. Guinigundo said that Philippine GDP growth of 6-8% annually would bring the economy to around P60 trillion by 2036

“To overcome this setback, growth will have to be between 9% and 9.5% through 2028 to be able to return to the original growth path,” he said.

In 2024, the economy expanded by 5.6%, from the 5.5% print in 2023 amid subdued consumption and lower farm output. It fell short of the government’s revised 6-6.5% target.

“It’s easy to blame the onslaught of typhoons during the latter part of the year, which constrained economic expansion. Such weather disturbances could indeed explain part of the failure, but not the entire dynamics,” GlobalSource said.

The economy grew by 5.2% in the fourth quarter, slower than the 5.5% print in the same period in 2023 after a series of typhoons hurt agricultural output.

“Sufficient stock buffering, mangrove propagation, zonal building along the coasts could have also mitigated the effects of these supply shocks. Yes, food inflation likewise deterred economic growth because private consumption spending was generally restrained,” GlobalSource said.

NEDA Undersecretary for Policy and Planning Group Rosemarie G. Edillon attributed the weaker-than-expected GDP growth in 2024 to “extreme weather events, geopolitical tensions, and subdued global demand.”

Source: Business World

Philippines needs 9-9.5% growth to return to pre-pandemic track

The economy needs to grow by at least 9% to 9.5% a year until 2028 to return to its pre-pandemic growth track, a former Bangko Sentral ng Pilipinas (BSP) official said.

During the MAP Economic Briefing and General Membership Meeting, GlobalSource Partners analyst Diwa C. Guinigundo said that the current government’s target of “between 6% to 8% annually, by 2036 (the Philippines) should be reaching only P60 trillion.”

“To overcome this setback, growth will have to be between 9% to 9.5% through 2028 to be able to return to the original growth path,” he said.

Last year, Mr. Guinigundo pushed for targets of 9.4% growth.

The Development Budget Coordination Committee (DBCC) on December trimmed the economic growth estimate for this year to 6-6.5% but widened the target band to 6-8% until 2028, due to “evolving domestic and global uncertainties.”

Finance Secretary Ralph G. Recto described as “doable” growth of between 6% and 6.5%.

In 2024, the economy expanded by 5.6%, following a 5.5% reading in 2023. It fell short of the government’s revised 6-6.5% target.

“We grew by only 5.5% in 2023 and 5.6% last year. Of course, we take pride in saying Philippine growth performance surpassed the global average in 2022 and 2023 of 3.5% and 3.3% respectively,” he said. 

“But we had the economy stall in 2020 and the years following that, so we have a lot of catching up to do.”

Mr. Guinigundo said risks to the economy include fiscal and debt sustainability, with revenue effort remaining low, food security issues, and political disunity.

“Since the Trump policy of tariff increases and tax cuts are potentially inflationary, we don’t expect the Fed to be very aggressive in reducing the target interest rate,” he added in his presentation.

“With the BSP having the space to further ease monetary policy, we see a potential capital outflow, peso depreciation, and therefore, the resurgence of inflation.”

Mr. Guinigundo noted that the budget deficit, which narrowed to P1.506 trillion in 2024, remains  in the “trillion mark.”

He said improved tax administration can only yield much, as can “squeezing” state-run firms for more dividends.

“This is after Congress forced the split banks and other GOCCs to continue to the Maharlika Investment Fund. No wonder, from the pre-pandemic (debt) of $7.7 trillion, we saw the crisis ending at $16 trillion. In January 2025, $300 billion was added to National Government debt,” he said.

Source: Business World

Philippines unlikely to hit yearly GDP target for the second time in a row

The Philippines may have difficulty achieving the upper end of the government’s 6-8% gross domestic product (GDP) growth target amid heightened global uncertainties this year.

"The country could hit 8% growth this year", Finance Secretary Ralph G. Recto

said, “6-6.5% [growth] is doable for 2025.”

Mr. Recto, however, said the outlook will depend on “inflation, interest rates, and strength of US dollar.”

The Philippine economy expanded by 5.6% last year, slightly faster than 5.5% in 2023 but fell short of the government’s revised 6-6.5% target.

The National Economic and Development Authority earlier said the GDP growth was hampered by extreme weather events, geopolitical tensions, and subdued global demand — which is now considered as the “new normal.”

Multilateral lenders World Bank and the Asian Development Bank project the Philippines to grow by 6.1% and 6.2% in 2025.

Ateneo School of Government Dean Philip Arnold “Randy” P. Tuaño said the Philippines will “face difficulty” meeting the 8% growth target.   

“It was relatively easy to achieve a 7% to 8% growth in the 2022-2023 period as we have been coming from a low-income base during the pandemic,” Mr. Tuaño said.   

“Even then, 5% to 6%, while a respectable rate of growth, would make it difficult to achieve significant growth in income among the middle class and vulnerable in the next few years,” he added. 

HSBC economist for ASEAN Aris D. Dacanay said that achieving an 8% growth rate is possible, but “a tall order.”

He cited global and domestic headwinds, including a sluggish Chinese economy, tariff risks, and climate-related impacts on the agricultural sector.

“This isn’t to say the Philippines won’t grow. Growing by 6.3%, we expect it to be one of Asia’s top performers in 2025 with the business process outsourcing sector (BPO), digitalization, and household consumption — sectors of the economy that are not subject to tariff risks — leading the charge,” he said.

In a note, Citi downgraded its 2025 GDP forecast to 5.9%, from 6% previously, after the weaker-than-expected growth momentum in 2024.

“Still, recent activity data such as income remittances  continue to suggest that domestic demand would remain well-supported. Commercial bank loans rose 11.1% year on year in November 2024 suggesting robust business activities and consumption growth…

Furthermore, continued monetary easing and more moderate inflation are also expected to support domestic demand expansion in 2025,” Citi said.

MORE INVESTMENTS NEEDED

Mr. Recto said the upper end of the government’s target “can only be achieved if private investments double or triple.”

Department of Budget and Management (DBM) Principal Economist Joselito “Jojit” R. Basilio said the economy is likely to post 6-7% growth this year, although the upper end of the target “remains doable under certain circumstances.”

“Aside from the government’s continued ramping up of spending on public construction, recently approved PPPs (public-private partnership) projects should complement the aggressive ‘Build Better More’ program,” he said.

“But there are conditions that can push the economy to do more and grow by 7% to 8% in 2025,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said hitting the upper end of the 2025 goal is a “long shot, realistically.”

“This would require more foreign and local investments, more tourists especially foreign, more merchandise exports that all generate more jobs and other economic opportunities that lead to higher per capita income,” he said.

To drive faster growth this year, Mr. Tuaño said the government should accelerate infrastructure projects and push regulatory reforms to boost investments, especially outside of the main urban centers.

The government should also invest in human resource development via education, healthcare, technological upgrading, and boost small businesses to drive growth, he said.

“Some potential opportunities for growth include stronger consumption driven by remittance growth and continuous expansion of services, and also the rebound of tourism,” Mr. Tuaño said.

Citi said continued policy easing by the Bangko Sentral ng Pilipinas will support GDP growth this year. It maintained its expectation for a 25-basis-point (bp) rate cut this month.

“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, the Philippines’ midterm election campaigning’s potential positive impact on domestic demand (although investment may see some delays from the 45-day pre-election ban on project disbursement) etc,” Citi said.

The Monetary Board has cut benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August 2024, bringing its key rate to 5.75%.

Mr. Basilio said private consumption is expected to recover strongly, increasing by 6% in 2025 due to stabilized inflation and lower interest rates.

“The domestic demand is also anticipated to shift from ‘being subdued’ to one of gaining its momentum,” he said.

Mr. Basilio also noted that agricultural output is anticipated to make “a strong rebound” this year.

However, Mr. Dacanay said relying on fiscal and monetary policy to boost growth will be difficult.

“The government is in the midst of consolidating its fiscal resources from the pandemic, while the Federal Reserve puts a floor under how much the Bangko Sentral ng Pilipinas can cut policy rates to boost growth,” Mr. Dacanay said.

RISKS TO THE OUTLOOK

Analysts cited geopolitical tensions and uncertainty as one of the downside risks to the Philippines’ economic outlook.

“Downside risks include geopolitical risks and uncertainties in global trade markets, considering further that goods export sector performance has been relatively anemic,” DBM’s Mr. Basilio said.

Mr. Tuaño said other downside risks include slower export growth due to “tariff escalation in the developed world… and natural disasters taking a toll on productive labor and capital.”

On the other hand, key upside risks include improved labor market conditions and election spending.

“For the current year, election spending is expected to result in increased economic activities, including advertising and campaign-related expenses in transport, hospitality, retail trade and others,” DBM’s Mr. Basilio said.

Source: Business World