The ASEAN+3 Macroeconomic Research Office (AMRO) has revised its Philippine growth forecast for 2024 to 5.8 percent versus its previous estimate of 6.1 percent while retaining its 6.3 percent projection for 2025.
In an online press briefing on Tuesday, Jan. 21, Singapore-based AMRO chief economist Hoe Ee Khor said that while they downgraded its growth forecast for 2024 based on its latest January 2025 ASEAN+3 Regional Economic Outlook (AREO) update, they still think the Philippines is “one of the stronger, faster-growing economy in the region.”
“We kept the growth forecast of 6.3 percent (for 2025), that’s among the highest in the region,” said Khor.
He said the local economy will sustain its growth trajectory over the medium term with the Bangko Sentral ng Pilipinas’ (BSP) easing policy rate.
“The BSP has started to ease monetary policy and the governor (BSP Governor Eli M. Remolona Jr.) has announced that there’s room for them to continue easing. The real interest rates are still pretty high,” said Khor.
The AMRO chief economist also noted that they are seeing signs that the economy “is beginning to respond” to the lowering of borrowing rates.
“So, for next year, we expect growth to be much stronger and supported by a stronger improvement in domestic demand,” said Khor, adding that the exports sector will recover as well.
The AMRO growth estimate is on the lower side of the government's six percent to eight percent target for 2025.
Last year, the BSP cut its target reverse repurchase (RRP) rate or the policy rate by a combined 75 basis points (bps) or from 6.5 percent to 5.75 percent exit rate. Most economists expect the BSP will continue to normalize interest rates this year with a decelerating inflation path to within the target range of two percent to four percent.
The latest AREO predicts Philippine inflation will settle at 3.2 percent by 2025. Last year, inflation averaged 3.2 percent, lower than 6.3 percent in 2023.
Meanwhile, the AREO has revised its regional growth forecast lower to 4.2 percent this year from its October projection of 4.4 percent. For 2024, it has retained its estimate of 4.2 percent growth.
AMRO said that while “firm domestic demand and exports growth are expected to underpin regional growth, escalating trade tensions, including higher tariffs, may dampen external demand.”
It still expects the ASEAN+3 region to post strong growth, and it is more optimistic than other forecasters and noted that growth in several ASEAN economies “offset marginally weaker-than-expected performance in the Plus-3 economies”. These are China, with Hong Kong, Japan and Korea.
ASEAN+3 headline inflation for 2024 is projected to moderate to 5.1 percent from 6.3 percent in 2023. For 2025, the inflation is also expected to be lower at 4.6 percent for the region.
While growth in the region is expected to be sustained this year, it has been revised lower due to a new baseline assumption that the US will start implementing higher tariffs on China, probably in the second half to the latter part of this year, according to Khor.
But, he said the impact of these tariffs will be more on China, Japan, and Korea while the rest of ASEAN, including the Philippines, will be less affected.
“The global tech upcycle bolstered ASEAN+3’s export performance in 2024, helping to offset weaknesses in domestic consumption in some parts of the region,” said Khor. “However, rising trade tensions, particularly the imposition of higher US tariffs, could dampen external demand for the region and other parts of the world in the coming year,” he added.
AMRO said the economic outlook for ASEAN+3 – which contributes 40 percent of global growth – has significant uncertainties, such as escalating trade tensions and shifting expectations for US monetary policy.
“The resurgence of inflation in the US could lead to the US interest rate remaining high for an extended period, leading to a stronger US dollar and overall tighter global financial conditions. This will likely spillover to the region, complicating the conduct of monetary policy, with policy rates compelled to rise or remain high in response to capital outflows and sustained exchange rate depreciations,” noted the AREO report.
Economic activity across the region could moderate further as a result, it added.