Economy to expand at faster pace in 2024

MANILA, Philippines — The Philippine economy is expected to grow at a faster pace this year than in 2023 despite headwinds, but the growth will be below the government’s target, according to First Metro Investment Corp. (FMIC).

During FMIC’s briefing Thursday, University of Asia and the Pacific economist Victor Abola said the economy is expected to post faster growth this year than in 2023.

“This year, we continue to anticipate external headwinds. Global growth outlook remains subdued. While headline inflation has softened in many countries driven by the decline in food and energy prices, core inflation remains a concern. External uncertainties such as the movements of the Fed and a potential sharper slowdown in China could drag growth,” FMIC president Jose Patricio Dumlao said.

“Amidst all this, the country’s economy, with its strong macroeconomic fundamentals, is expected to expand by six percent,” he said further.

Abola said the country’s economic growth is expected to accelerate to six percent this year from 5.5 percent last year.

The economy grew by 5.9 percent in the third quarter, faster than the 4.3 percent in the second quarter. This brought growth in the January to September period of last year to 5.5 percent.

The government’s growth target for 2023 is six to seven percent.

While FMIC expects the economy to expand at a faster pace this year, the growth forecast is lower than the 6.5 to 7.5 percent growth being targeted by the government for 2024.

“I think they will not be able to make the 6.5 percent (target) unless foreign investments come in,” Abola said.

He said this year’s growth would be driven by the services sector, particularly transport, accommodation and food services, which are experiencing revenge spending.

“I would like to emphasize that the revenge spending is not yet over. We’re just seeing the beginning of it because high inflation, you know, sort of toned down,” he said.

Inflation eased to a 22-month low of 3.9 percent in December last year from 4.1 percent in November 2023, and 8.1 percent in December 2022.

In 2023, inflation averaged six percent, higher than the 5.8 percent a year ago.

Abola said inflation is expected to ease to 3.8 percent this year, which is within the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target.

As the peso is expected to remain under pressure due to persistent uncertainties on when and by how much the US Federal Reserve will cut policy rates, FMIC projects the local currency to trade within the P56 to 58 range against the dollar.

Abola said he also expects the BSP to be quite slow in cutting rates.