Domestic fiscal consolidation and global trade hiccups amid rising protectionism would hurt the Philippines' economic growth prospects, according to the think tank Capital Economics.

In a Nov. 29 report, Capital Economics senior Asia economist Gareth Leather and assistant economist Harry Chambers cited that quarter-on-quarter gross domestic product (GDP) growth in the Philippines accelerated to 1.7 percent in the third quarter from the 0.5-percent rise during the second quarter.

However, "we expect the economy to slow in the near term as tight fiscal policy and weak export demand weigh on activity," Capital Economics said, referring to the Marcos Jr. administration's plan to narrow the yawning budget deficit partly by tempering government spending on public goods and services.

The think tank forecasted quarter-on-quarter GDP expansion to fall below one percent during the first quarter of next year before exceeding one percent in the succeeding quarters.

Year-on-year, third-quarter GDP growth of 5.2 percent was the slowest in five quarters.

While the nine-month output expansion averaged 5.8 percent, President Ferdinand R. Marcos Jr.'s economic managers are hopeful that the six- to seven-percent growth goal for 2024 remains achievable.

But Capital Economics is less optimistic, seeing annual Philippine growth of 5.4 percent this year, below last year's 5.5 percent. While the think tank sees GDP expansion picking up to 5.8 percent next year, it would be below the government's targeted 6.5 to 7.5 percent.

This is despite easing inflation in the country, which last October "rebounded a little, driven by a pick-up in food inflation," Capital Economics noted.

A separate Nov. 29 report showed the two Capital Economics economists forecasting November headline inflation to inch up to 2.4 percent from October's 2.3 percent, still remaining within the Bangko Sentral ng Pilipinas' (BSP) two- to four-percent target band of manageable year-on-year price hikes.

The Philippine Statistics Authority (PSA) will report on October's consumer price index (CPI) on Thursday, Dec. 5.

For Capital Economics, lower year-to-date inflation—which fell to an average of 3.3 percent as of end-October from a 15-year high of six percent in 2023—augurs well to another BSP rate cut when its Monetary Board meets to decide on the policy stance on Dec. 19, the last policy-setting meeting for this year.

"We expect a further 25-basis point (bp) cut at [the BSP's] meeting in December, with more to follow in 2025," said Capital Economics, which foresees inflation to end 2024 averaging 3.3 percent and further drop to three percent in 2025.

Since the BSP began its monetary easing cycle last August, it has already lowered the policy rate by a cumulative 50 bps to the current six percent.

From Capital Economics' expectations of a 5.75-percent overnight borrowing rate by end-2024, the think tank expects it to be further reduced by 100 bps next year to 4.75 percent by end-2025.

As Manila Bulletin earlier reported, the Philippine peso is expected by Capital Economics to further weaken to 62:$1 by the end of next year from the projected 59-level against the US dollar—which is seen to be strengthened by US President-elect Donald J. Trump's protectionist economic policies—by this year's end.