Philippine economy likely missed target in 2024 despite late push


While the Philippine economy has likely accelerated further in the last three months of 2024, majority of the private-sector economists polled by Manila Bulletin doubt its degree was enough to reach the government’s growth target. 

Following the lower-than-expected quarter-three gross domestic product (GDP) rate, private-sector economists monitoring the Philippines anticipate the central bank to continue reducing key borrowing costs this 2025 but at a slower pace.

Thirteen economists gave their forecasts regarding the performance of the local economy in the last quarter of 2024. Most of the estimates suggested a growth rate below six percent or the lower range of the revised 6.0 to 6.5 percent target. 

As of the third quarter, the local economy grew by 5.2 percent, significantly slower than the second quarter’s 6.4 percent. For the first three quarters, growth clocked into 5.8 percent. 

For the quarter-four and full-year development, the Philippine Statistics Authority (PSA) is set to release the data on Jan. 30. 

Notably, Rizal Commercial Banking Corp. (RCBC) chief economist  Michael Ricafort and Union Bank of the Philippines chief economist Ruben Carlo O. Asuncion gave the highest predictions, both breaching the six-percent growth mark. 

Ricafort, who projected a 6.2 percent growth rate, cited robust consumer spending during the Christmas season as the main growth driver. 

“Preparations for the May 2025 midterm elections would have also led to faster government spending, especially on infrastructure, in the latter part of 2024,” Ricafort added.

He also pointed to the successive interest rate cuts in late 2024 as one of the factors that could have “supported the faster growth in investments, either new investments or expansion projects.”

Similarly, Asuncion—who gave a 6.1 percent forecast—linked the robust growth to the rising loan growth due to the central bank’s recent rate cuts. He also cited other factors such as the improved purchasing power of consumers due to disinflation and overseas Filipino remittances.

Nine other economists provided a below-six-percent forecast including Chinabank Research, Moody’s Analytics economist Sarah Tan, HSBC ASEAN economist Aris Dacanay, Regina Capital Development Corp. economist Luis Gerardo Limlingan, Bank of the Philippine Islands (BPI) senior vice president and lead economist Emilio S. Neri, Jr., Nomura Singapore Limited economist Euben Paracuelles, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco, UA&P Capital Markets Research senior economist and director Victor A. Abola, and Ateneo Center for Economic Research and Development director Ser Percival K. Peña-Reyes. 

Chinabank Research echoed Ricafort and Asuncion’s views, particularly noting how household consumption rebounded in the quarter of 2024, driven primarily by tamed inflation, robust labor market, and increased government spending ahead of the midterm elections.

“On the other hand, adverse weather—with six typhoons consecutively hitting the country between October and November—disrupted economic activities in agriculture, construction, and tourism, among others,” it also noted, adding that the trade deficit, due to weak semiconductor export performance, “likely weighed on overall growth.” 

These were the dominant factors affecting the 2024 economy, thus a 5.8 percent full-year forecast of Chinabank Research. 

Growth target missed

Consensus expectations were leaning towards a 5.7 percent average expansion rate for the full year 2024, falling largely short of the government’s target. 

According to the country’s socioeconomic planner, Arsenio Balisacan, growth targets for last year were likely missed as it might have failed to accelerate to 6.5 percent rate—the required quarter-four figure to hit the target. 

“Growth was dragged down by the severe typhoons that hit the country, mostly affecting the agriculture sector. Exports also underperformed amid the economic slowdown in major economies,” Neri said, resonating with the views of most economists. 

Dacanay further stressed that the underperformance of goods exports continued “even when many in Asia have seen some pick-up in export demand,” while Leather described it as losing momentum following its sharp growth in the third quarter.

Although Dacanay and Ricaofort suggested that recent reductions in borrowing costs increased investment, Chanco remains firm in his argument that the initial cuts by the Bangko Sentral ng Pilipinas (BSP) have yet to show tangible effects on economic expansion.

“I still think it’s far too soon whether the BSP cuts so far have had any noticeable impact on economic activity; it’s worth [remembering] that the real rate of interest remains historically high given the now-subdued inflation. As such, monetary policy is still relatively ’tight’ at these levels,” Chanco said. 

Trump 2.0 on rates

With the Trump 2.0 administration coming into play, local monetary policy easing is influenced by the highly anticipated policy changes in the returning US president. 

“So far we expect two 25 bp reductions this year as uncertainties abroad may limit the extent of monetary easing,” Neri said, adding that the GDP data may influence the timing of the BSP’s rate cuts.”

“A slower pace of rate cuts from the Federal Reserve is very likely as the policies of the new US administration may stoke inflation. Aggressive rate cuts from the BSP in this scenario may exert pressure on the peso,” Neri added. 

Similarly, Deutsche Bank economist Junjie Huang asserted that while further easing by the central bank is likely, he expects it to be “limited” to a 50 basis-point reduction for 2025, “given elevated US interest rates and potential further pressure on the peso.” 

“We expect monetary policy easing to continue in 2025,” Tan also said, looking for two 25 basis-point cuts by the end of the year. 

“However, BSP will be prudent in monitoring global developments that could reinflate inflation and weaken the strength of the peso. For one, the prospect of tariffs from the U.S. looms large, and the pace of global interest rate normalisation is likely to slow. These will play into the BSP’s decision to loosen monetary policy further this year,” Tan further said. 

Notably, both Chanco and Leather anticipate a 100-basis-point cut for the whole year, bringing the key policy rate to 4.75 percent at end-2025. 

“Our core view is that the Monetary Board [MB] will enact a further 100bp in rate cuts this year at least, with the risks probably skewed for them to do a bit more,” Chanco said.