PH economic growth to accelerate this year: economist

By Anna Leah Gonzales, Philippine News Agency

Neri earlier forecast a 6.1 percent economic growth for 2024. (File Photo: JC Gellidon/Unsplash)

MANILA – Growth of the Philippine economy is expected to accelerate this year, driven by the continued expansion of household consumption, an economist from the Bank of the Philippine Islands (BPI) said.

“We expect the Philippine economy to expand by 6.3% in 2025, outpacing the previous year’s performance, with household consumption remaining its biggest driver,” BPI lead economist Jun Neri said in a commentary released late Wednesday.

Neri earlier forecast a 6.1 percent economic growth for 2024.

Neri said factors sustaining household consumption growth such as remittance inflows, remained in place despite the economic slowdown in major economies.

“With aging populations abroad driving the demand for labor, the impact of headwinds on remittances like trade barriers and anti-immigration sentiment will likely be limited. Remittances also have a strong track record of stability and growth even in times of crisis, as seen during the pandemic,” he said.

Neri said the country’s low unemployment rate is also expected to support consumption.

“This should continue to drive the growth of household income and the expansion of the middle class,” he said.

Latest data from the Philippine Statistics Authority showed that the unemployment rate further went down to 3.2 percent in November last year from 3.6 percent in November 2023.

Consumer spending, meanwhile, is expected to grow at a faster pace this year as inflation remains at a manageable level.

“This improvement will likely be most apparent in discretionary spending after a period of slower growth caused by high inflation, as consumers focused more on essentials,” said Neri.

Inflation will likely settle at 3.5 percent this year, well within the government’s 2 to 4 percent target, Neri said.

Meanwhile, he said the recent reduction in interest rates and banks’ reserve requirement ratio (RRR), will also help boost economic growth.

To recall, the Bangko Sentral ng Pilipinas reduced policy rates for a total of 75 basis points this year.

The BSP also reduced the RRR of universal and commercial banks and non-bank financial institutions with quasi-banking functions by 250 basis points.

With inflation continuing to settle within the target, Neri said the BSP could further reduce rates by another 50 basis points this year.

“Private sector spending in construction activities has not yet returned to pre-pandemic levels, but lower interest rates may fast track its recovery. Moreover, as household consumption strengthens, businesses are likely to increase capital spending to meet growing demand,” said Neri.

Neri said election spending could also provide a boost to the economy this year.

“Historically, GDP (gross domestic product) growth is faster in election years, driven by heightened economic activity fueled by election-related spending in various regions,” he said.