The Philippine economy should grow faster this year on the back of robust consumer spending, a University of Asia and the Pacific (UA&P) economist said on Thursday.
"I think that we'll see faster GDP (gross domestic product) growth in 2024," UA&P senior economist Victor Abola told reporters in a briefing.
"Growth will accelerate ... driven by the services sector. Particularly ... transport, accommodations and food services, which are experiencing revenge spending," he added.
"I would like to emphasize that the revenge spending is not yet over. We're just seeing the beginning of it because high inflation had, you know, sort of toned down that expansion."
Abola expects GDP growth of 6.0 percent this year — short of the government's 6.5- to 7.5-percent target — fueled by private consumption, increased government infrastructure spending, a strong labor market and a continued tourism recovery.
The lower end of the target is unattainable, the economist said, "unless foreign investments come in."
"[I]f we look at 2023, foreign investments were actually down significantly. So, well, from down to up may not be so difficult. But we have to see how things pan out in the coming months," Abola said.
GDP growth markedly slowed to 4.3 percent in the second quarter of last year, primarily due to a contraction in government spending. It rebounded to 5.9 percent in the third quarter but year-to-date remained below target at 5.5 percent.
Full-year GDP results will be announced by the Philippine Statistics Authority at the end of this month.
The interagency Development Budget Coordination Committee last month trimmed the 2024 growth target to 6.5 to 7.5 percent from 6.5 to 8.0 percent, noting the potential risks of a global economic slowdown, El Niño, other natural disasters, as well as geopolitical and trade tensions.
Abola said growth, while still positive, would be weighed down by external challenges such as a subdued global economy outlook and uncertainties tied to US Federal Reserve (Fed) actions and a potential Chinese slowdown.
Inflation, meanwhile, is expected to ease to 3.8 percent this year, bringing much-needed respite to household incomes. It ended 2023 at 6.0 percent, well above the 2.0- to 4.0-percent target of the Bangko Sentral ng Pilipinas (BSP).
First Metro Investment Corp. Executive Vice President Daniel Camacho said that while inflation was expected to moderate, "we see the BSP maintaining its rate hikes for at least the next six months."
Abola said the central bank would likely first cut by 25 basis points (bps) in June. "Depending on the Fed moves, it will probably mimic the rate cuts in the second half," he added.
The BSP's policymaking Monetary Board kept key interest rates unchanged during its last meeting in December.
Its first meeting for 2024 will be on February 15, and analysts again expect it to hold fire with inflation still to settle firmly within the 2.0- to 4.0-percent target range.
Surging inflation following Russia's invasion of Ukraine prompted a tightening spree that began in May 2022.
Rate hikes totaling 450 bps — the last off-cycle 25 bps in October — have pushed the BSP's benchmark rate to 6.5 percent, the highest since 2007.
Source: Manila Times