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Manila Bulletin devider Business devider Philippines to sustain 'solid' growth in 2025—think tank

Philippines to sustain 'solid' growth in 2025—think tank

Published Dec 31, 2024 09:41 am

The Philippines is expected to sustain robust economic expansion in 2025 amid expectations of slower price hikes and lower interest rates boosting consumer spending, according to the think tank Capital Economics.

"Strong consumption should ensure another year of solid growth in 2025," Capital Economics senior Asia economist Gareth Leather and assistant economist Harry Chambers said in a Dec. 30 report, citing that the Philippines' gross domestic product (GDP) expanded by a faster-than-expected 1.7 percent quarter-on-quarter during the third quarter of 2024.

GDP grew by just 0.5 percent quarter-on-quarter in the preceding April-to-June 2024 period.

This, even as the year-on-year GDP growth of 5.2 percent during the July-to-September quarter of 2024 was the slowest in five quarters.

Capital Economics projected quarter-on-quarter GDP expansion from October to December 2024 to fall slightly below one percent, before breaching the one-percent level during each of the four quarters of 2025.

In terms of annual GDP growth, Capital Economics earlier forecasted a slower 5.4 percent for 2024 from 5.5 percent in 2023, before accelerating to 5.8 percent in 2025 -- although below the government's 2024 goal of six to 6.5 percent and the 2025 target of six to eight percent.

Among emerging Asian economies, near-term Philippine growth rates would only be outpaced by Vietnam and Bangladesh, based on Capital Economics' estimates.

"Inflation in the Philippines edged up again in November [2024] to 2.5 percent year-on-year but still sits comfortably within the Bangko Sentral ng Pilipinas' (BSP) two- to four-percent target range," Capital Economics noted.

"The BSP cut rates by 25 basis points (bps) for a third time [in 2024] at its December meeting. We are expecting a further 100 bps [of] cuts in 2025," it added.

In particular, Capital Economics had projected another 25-bp cut as early as the first quarter of 2025.

This means that the BSP's current 5.75-percent policy rate is seen by Capital Economics settling at 4.75 percent by end-2025.

Capital Economics' BSP policy rate forecasts came on the back of expectations that annual headline inflation would further ease from six percent in 2023 to 3.2 percent in 2024 and 2.8 percent in 2025.

As Manila Bulletin earlier reported, the think tank had also forecasted the Philippine peso to further weaken to 62:$1 by end-2025, while the Philippine Stock Exchange Composite Index (PSEi) is seen going up in 2025 to the 7,500 level.

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