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Manila Bulletin devider Business devider HSBC: Philippine economy to lead ASEAN growth despite trade uncertainty

HSBC: Philippine economy to lead ASEAN growth despite trade uncertainty

Published Jan 14, 2025 06:24 am

London-based HSBC projects that the Philippines and other Southeast Asian countries will deliver robust economic growth this year, with the peso remaining resilient despite a stronger US dollar.

On Tuesday, Jan. 14, James Cheo, HSBC chief investment officer for Southeast Asia and India, projected that the ASEAN-6 economies—the Philippines, Indonesia, Malaysia, Singapore, Thailand, and Vietnam—will achieve a growth rate of 4.8 percent in 2025.

This gross domestic product (GDP) growth rate surpasses the regional average of 4.4 percent, fueled by strong domestic consumption and investment.

While trade uncertainty poses a potential risk to export growth, Cheo believes this will be offset by robust private consumption, which comprises 60 percent of the region's GDP.

He also noted that ASEAN countries exporting AI-related technologies are poised to benefit from the global tech boom and shifting trade patterns resulting from US trade restrictions on China.

In particular, Cheo expects the Philippine economy to achieve "one of the strongest growth rates in the region this year," driven by "robust domestic consumption, a thriving business process outsourcing (BPO) sector, and increasing investments in digital services."

HSBC cited the Philippines' "unique strength" in services exports as a buffer against global trade uncertainties, stating that this, along with overseas remittances, will remain crucial for economic stability.

Household consumption is projected to return to pre-pandemic growth rates, supported by easing inflation, a strong labor market, and increased infrastructure spending.

HSBC also cited the country's monetary and fiscal policies as contributing factors to growth.

With this, the bank maintained its forecast that the Bangko Sentral ng Pilipinas (BSP) will reduce the country’s key policy rate to 5.0 percent by the third quarter of 2025, through successive 25 basis point reductions each quarter.

This gradual approach allows the BSP to "cautiously navigate external risks" such as peso volatility and the US Federal Reserve's easing cycle.

Peso to remain resilient

HSBC believes the Philippine peso will remain resilient despite a stronger US dollar. Cheuk Wan Fan, HSBC chief investment officer for Asia, cited high interest rates, lower trade dependency, and strong domestic resilience as supporting factors.

Cheo echoed this bullish outlook, projecting the peso to settle at P59.8:$1 by the end of 2025. Currently, the peso is trading around the 58 level, closing at P58.7:$1 on Jan. 13.

While HSBC forecasted the peso to weaken to the lower 59 levels by year-end, Singapore-based DBS Bank expects a further slide against the strengthening US dollar.

DBS Bank revised its currency outlook to reflect a more rapid appreciation of the US dollar in the first half of 2025, predicting the peso to breach the 60 level in the second quarter, reaching P60.8:$1.

However, DBS Bank expects the peso to gradually rebound to the 59 level in 2026.

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