By means of Luisa Maria Jacinta C. Jocson, Reporter
PHILIPPINE ECONOMIC Growth could weaken further next year, missing the government’s target while growth is not yet complete fiscal consolidation after the corona crisis 2019 (COVID-19). and still high interest rates, analysts said.
Pantheon Macroeconomics says in its Emerging Asia Outlook report that it expects a “continued slowdown” next year. It expects the economy to grow 5.4% this year and slow to 5.2% in 2025.
These are both well below the government’s targets of 6-6.5% and 6-8% for 2024 and 2025 respectively.
The Philippine economy grew 5.2% in the third quarter, weaker than expected and the slowest in five quarters.
“Research shows that a slow rebuilding of household savings in the Philippines due to the coronavirus crisis and the damage from the cost of living crisis have cushioned this year’s decline in consumption growth, albeit likely at the cost of delaying of a real recovery in GDP (gross domestic product). growth,” says Pantheon.
It added that the country’s economic output would “remain hampered by incomplete fiscal consolidation following the COVID-19 crisis and historically tight monetary policy.”
ANZ Research said in its latest quarterly report that it expects economic growth to slow from 5.7% this year to 5.6% in 2025. It said the outlook for 2025 is “bleak”, complicated by the lack of domestic growth catalysts amid declining exports.
Consumer confidence has remained static and below pre-pandemic levels in most Asian economies, the report pointed out.
“Consumer surveys in both Indonesia and the Philippines indicate a decline in household savings in recent years.”
The Institute of International Finance said it expects Philippine growth to average 5.8% this year and in 2025.
“Countries that rely more on dollar financing, such as Malaysia, Korea and the Philippines, are likely to face increasing pressure from a strong US dollar and a ‘longer’ US Fed Funds policy rate,” the report said.
The peso fell to the level of P59 per dollar twice last month, hitting record lows on November 21 and 26.
“The Philippines in particular stands out for its higher external financing needs, given its larger current account and budget deficits,” the institute said.
Meanwhile, both Pantheon and ANZ expect inflation to stabilize at 3.2% this year, compared to the Bangko Sentral ng Pilipinas (BSP) estimate of 3.1%.
The central bank is also expected to continue its interest rate cutting cycle next year. ANZ expects the policy rate to end at 5.75% this year and 5% at the end of 2025.
“Real interest rates are likely to remain high in Indonesia, South Korea and the Philippines, where rate cuts of 50 to 100 basis points are likely by 2025,” the report said.
“The efFInterest rate cuts in Indonesia and the Philippines will be limited by the need to rebuild household savings,” the report said.
Pantheon also expects the policy rate to end this year at 5.75%, but expects it to fall further to 4.75% by the end of next year.
The Philippine central bank started its easing cycle in August with a 25 basis point interest rate cut. In October, the policy rate was cut again by 25 basis points, bringing the policy rate to 6%.
The Monetary Board will hold its final policy review of the year on December 19.
BSP Governor Eli M. Remolona Jr. earlier during the meeting signaled the possibility of another cut of 25 basis points.