LOWER-THAN-EXPECTED third quarter growth and a string of severe storms have prompted the World Bank to trim its 2024 Philippine growth forecast.
“Several typhoons have affected millions of people, destroyed crops and property, damaged infrastructure, and disrupted economic activity, particularly in tourism and construction,” senior economist Jaffar Al-Rikabi said in a briefing on Tuesday.
The gross domestic product (GDP) growth forecast for this year is now 5.9 percent, down from 6.0 percent previously and just below the government’s recently-revised target of 6.0-6.5 percent.
Al-Rikabi said that “advancing the digital economy, including by encouraging greater adoption of core digital technologies by businesses, can expand the country’s growth potential.”
“Increased digitalization could provide expanded market access, build resilience to economic shocks, and increase the country’s productivity, efficiency, and competitiveness,” he added.
For next year, the World Bank expects the GDP growth of 6.1 percent, within the revised 6.0 -to 8.0-percent goal.
Al-Rikabi said the momentum could be sustained until 2026, during which growth is expected to edge down to 6.0 percent but remain with the 2026-2028 target of 6.0-8.0 percent.
Maybank sees within-target growth
Also yesterday, Maybank Research said that it expected the country to post 6.0 percent growth next year, driven by robust domestic demand and the impact of lower policy rates.
“Our estimate is based on a pickup in domestic demand in anticipation of higher private consumption, spurred by election spending and impact of BSP (Bangko Sentral ng Pilipinas) rate cuts, plus firmer gross fixed capital formation offsetting softer government consumption,” it said.
“Net exports should improve given the uptrend in the semiconductor cycle but still mired with uncertainty amid US trade and tariff policy under Trump 2.0,” it added.
Maybank Research expects inflation to drop to 3.2 percent this year from 6.0 percent last year.
This could further slow to 3.1 percent in 2025 and 3.0 percent in 2026 — within the central bank’s 2.0- to 4.0-percent target — but flagged some risks including global food inflation, higher import costs, and rising electricity prices.
“Nonetheless, inflation will remain manageable given the government’s measures such as Executive Order 62 in maintaining lower selected food tariffs and Administrative Order 20 in removing the non-tariff barriers on importation of agricultural products,” it said.
With the positive inflation outlook, Maybank Research said that the central bank may cut rates by 100 basis points, bringing the policy rate to 4.75 percent by end-2025.
Benchmark rates currently stand at 6.0 percent, following the two 25-bps reduction of the central bank and is expected to implement another 25-bps cut at its December 19 meeting.
Poverty gains expected
World Bank lead economist Gonzalo Varela, meanwhile, said that strong GDP growth in the medium term would put the country in a “better position to continue advancing on poverty reduction, supported mainly by improvements in household incomes and also by job creation.”
The World Bank expects the country’s poverty incidence to hit 13.6 percent this year, from 15.5 percent 2023, and further drop to 11.3 percent by 2026.
“This reduction is projected to be supported by robust economic growth, rising real household incomes,” it said.
“Climate-related shocks and inflationary pressures on food prices remain key risks to poverty alleviation,” it added.
According to the Philippine Statistics Authority, the number of poor Filipinos declined last year to 15.5 percent of the population or 17.54 million people, keeping the government on track to achieve the 2028 target of 9.0 percent.
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