THE PEOPLE OF THE PHILIPPINESmestic product (GDP) growth will likely be below the target range of 6-7% this year, say analysts.
“The economy needs more support. I look forward, fiscal stability and weak export demand they should keep the growth rate down,” said the Capital Economics report.
Capital Economics expects GDP growth of 5.1% this year, well below the government’s target of 6-7%.
For its part, Nomura Global Markets Research said it predicts GDP growth to 5.6% this year.
“We maintain our forecast that GDP growth will improve slightly to 5.6% in 2024 from 5.5% last year, before rising to 6.1% in 2025,” said Nomura’s research analysts Euben Paracuelles and Nabila. Money. .
The Philippine economy grew by 6% e fthe first part. To meet the lower end of the target, GDP growth should average 6% for the remainder of the year.
Economic data for the third quarter will be released on Nov. 7.
Nomura noted that second-quarter growth was “disappointing and reflected weak growth momentum, led by another sequential decline in private consumption.”
In the second quarter, GDP grew by 6.3%, faster than 5.8% in the previous quarter and 4.3% last year. However, at home fdomestic consumption rose 4.6%, down from 5.5% last year.
“The spending of public funds is still the main driver, as the government is making progress in infrastructure projects. The mid-term elections in May 2025 will provide further impetus for the coming year,” said Nomura.
Meanwhile, inflation appears to remain well within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target band this year.
“Inflationary pressures are weak… our forecast is that a combination of weak economic growth and lower food inflation will keep inflation low,” Capital Economics said.
Nomura is expecting a headlinefit rose to 3.1% this year, below the bank’s full-year forecast of 3.4%.
“Our forecast assumes that inflation remains low at around 1.9% in the fourth quarter, partlyflecting the impact of import rice tariff cuts,” he added.
Inflation fell sharply to a four-year low of 1.9% in September from 3.3% in August. Of fin the first nine months, infthe average reached 3.4%.
“After the BSP’s 25-bp (basis point) rate cut to 6.25% in mid-August, the further decline in inflation reinforces our view that the BSP will continue to cut rates,” it added.
The Monetary Board is expected to cut policy rates by 25 bps this week (Oct. 16).
“We expect another 25-bp cut at its scheduled meeting (Wednesday),” Capital Economics said.
“We reiterate our forecast that the BSP will decrease by 25 bps in each of the last two meetings of the year (ie October and December),” said Nomura.
This corresponds to a BusinessWorld a survey conducted last week, which showed that 16 out of 19 analysts expect the BSP to lower the target reverse repurchase (RRP) rate by 25 bps.
If possible, this would bring the target RRP rate to 6% from 6.25%.
“Looking beyond Wednesday’s meeting, we expect further declines for the rest of this year and into 2025. Our forecast that rates will end next year at 4.75% makes us more patient than consensus,” said Capital Economics.
ANOTHER FROM 2025
Meanwhile, Nomura expects the Monetary Board to cut by 25 bps at its first of three meetings next year before pausing.
“This will bring the RRP rate to 5% by May 2025 (ie, a total of 150 bps in reductions this cycle). The Fed’s ongoing cut cycle also supports BSP tapering, but we still think the BSP is unlikely to be aggressive with 50-bp clips,” it said.
“The big cut in the RRR (reserve requirement ratio) has already provided more flexibility and Governor Remolona has said he prefers a 25-bp cut to the policy rate,” it added.
The BSP will reduce the RRR for international and commercial banks and non-bank financial institutions with banking-like activities by 250 bps to 7% from 9.5%, effective Oct. 25.
BSP Governor Eli M. Remolona, Jr. he previously said they were looking to reduce the reserve requirement to 0% at the end of his term.
Meanwhile, Nomura said the government will once again strive to achieve its financial goals.
“We continue to forecast a fiscal deficit of 5.9% of GDP in 2024, above the revised medium term fiscal framework (MTFF) target of 5.6%.
“We think that these MTFF targets will be challenging to meet because of prior spending, such as priority infrastructure projects,” it added.
In the first eight months of the year, the budget deficit decreased by 4.86% to P697 billion.
This year’s budget deficit is set at 5.6% of GDP. The government aims to reduce the Deficit-to-GDP ratio to 3.7% by 2028.
“Expenditure payments tend to accelerate towards the end of the year and income growth may slow, in line with moderate GDP growth,” Nomura said.
“The passage of this bill to apply VAT (value added tax) to imported digital services is encouraging but will have a small revenue impact of 0.1% of GDP next year. We think that political risk could increase as the medium term approaches and indicate a reluctance to take major steps to reform the financial situation. ” – Luisa Maria Jacinta C. Jocson
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