WORSE-than-expected third-quarter economic growth has prompted Citi to trim its Philippine growth forecast for this year to 5.8 percent from 6.0 percent, below the government’s 6.0- to 7.0- percent target.
The research unit of the American multinational investment bank on Monday said the move “mainly reflects the weaker-than-expected outcome in Q3 vs. our previous estimate of 6.4 percent.”
Gross domestic product (GDP) growth came in below expectations in the third quarter, markedly slowing to 5.2 percent from 6.4 percent in April-June, primarily due to contractions in agriculture and construction.
Still, Citi expects growth to pick up in the last three months of the year and said the July-September result was not an indication of a slowdown.
“[W]e think it would be misleading to view the weaker Q3 expansion as the start of a slowdown as several negative factors in Q3 are one-off events,” it said.
It noted that the fisheries sector was affected by an oil spill in July and that African swine fever outbreaks had also constrained livestock output.
“Part of the slowdown in manufacturing and services activities was also due to weather-related suspension of school classes and work,” Citi continued.
It expects an improvement in GDP growth to 6.0 percent in the fourth quarter, supported by household consumption that will benefit from lower interest rates and improved sentiment as inflation continues to fall.
With the typhoon season set to end, infrastructure projects will also accelerate in the last three months of the year and the first quarter of 2025, it added.
Citi said that it was maintaining its GDP growth forecast for next year at 6.0 percent — below the government’s 6.5- to 7.5-percent target — but added that it saw some upside risks due to tailwinds from more rate cuts.
The Bangko Sentral ng Pilipinas will likely order another 25-basis point rate cut next month and order 75 bps in total next year, it said.
Low unemployment, strong remittances and loan growth, along with the impact of lower bank reserve requirements are expected to buoy domestic demand.
The newly enacted Create More law, which among others lowered corporate income taxes, will also help boost private sector spending and foreign direct investments, driving overall growth.
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