INDEPENDENT financial services and investment house Unicapital Group is forecasting gross domestic product (GDP) growth at 5.8 percent to 6 percent for fiscal year 2024 as consumer spending increased due to lower interest rates.
“We believe that there will be a favorable economic landscape, in the next coming quarters as well as in 2025, given the easy and key policy rates in the Philippines,” Unicapital Deputy Head of Research Wendy Estacio-Cruz said at a media briefing on Wednesday.
Estacio-Cruz said they anticipate a 50 basis points (bps) rate cut by the Bangko Sentral ng Pilipinas driven by the cooling inflation rate.
“We believe the inflation rate will actually cool down over the next couple of months due to recent rice tariffication (reduction) from 35 percent to 15 percent, effective July 5, and we expect that to be paid until 2028,” she noted.
Unicapital is expecting an apparent decline in the inflation rate starting in August because of the rice tariff reduction.
Estacio-Cruz explained that “with the rice tariff reduction, we’re expecting inflation rate to come down to below 4 percent for the next year. But if that happens to be rejected, we expect the inflation rate to somehow be at the 4-percent levels.”
“To give you some perspective, rice accounts for almost half of the Philippine food inflation. Therefore, we expect that to really affect our inflation rate moving forward,” she added.
The distribution of contribution to food inflation consisted of cereal products, including rice, corn, flour and bread accounted for 74.6 percent, while meat followed by 12 percent, and vegetables and others at 6.6 percent and 6.8 percent, respectively, according to the Philippine Statistics Authority.
The 5.8- to 6-percent GDP forecast was said to be on the low end of the government’s target of 6- to 7-percent.
“This should be supported by increased consumer spending as well as higher infrastructure spending by the government and the private sectors,” Estacio-Cruz said, adding that they expect infrastructure spending to account for 5 percent to 6 percent of the total GDP.
On the other hand, Unicapital expects the Philippine peso to further appreciate against the US dollar as the US Federal Reserve (Fed) is likely to reduce rates by September.
“The likelihood of the US Fed cutting rate soon is as early as September of this year because of the looming recession in the US,” where, she said, they “expect them to accommodate, or to have an accommodating fund resistance.”
The downside risks for Unicapital’s forecasts include prolonged interest rates and an escalation of geopolitical tensions disrupting trade supply. However, it noted that the country is not heavily reliant on external trade.
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