Economic Growth Forecasts for the Philippines: ADB Insights

According to the Asian Development Bank (ADB), the Philippines is expected to meet its economic growth target for this year, supported by decreasing inflation and anticipated interest rate cuts. However, projections for next year indicate that the growth might not fully align with the government’s objectives.

In its recently published “Asian Development Outlook” report, the ADB maintained its GDP growth forecast for the Philippines at 6% for 2024. If this prediction holds true, the country’s growth rate will match the lower end of President Ferdinand Marcos Jr.’s target range of 6 to 7%. Additionally, the Philippines would join Vietnam as the fastest-growing economy in Southeast Asia, surpassing the average growth rate of 5% forecasted for Developing Asia, which encompasses 46 ADB member nations.

Looking ahead to 2025, the ADB upheld its growth forecast for the Philippines at 6.2%, which falls short of the government’s target range of 6.5 to 7.5%. Nevertheless, the Philippines, along with Vietnam, is projected to be one of the top performers in the region.

The ADB noted that lower inflation rates and anticipated interest rate reductions by the Bangko Sentral ng Pilipinas (BSP) are expected to bolster consumer spending, which typically constitutes over 70% of the country’s GDP. The ADB indicated that moderation in inflation and likely monetary easing in the latter half of 2024 would support household consumption and investment.

Government data showed a slowdown in household spending growth to 4.6% in the first quarter of the year, marking the weakest performance since the 4.8% contraction during the first quarter of 2021, amidst persistent inflation and high interest rates. This slowdown contributed to a first-quarter GDP growth rate of 5.7%, which was below market expectations.

BSP Governor Eli Remolona Jr. mentioned that with the expected decline in inflation, partly due to the reduction of import duties on rice, the central bank might commence its easing cycle in August, potentially ahead of the US Federal Reserve.

The ADB’s report also retained its inflation forecasts for the Philippines at 3.8% for this year and 3.4% for the next, both within the BSP’s target range of 2 to 4%. Albert Park, ADB’s chief economist, highlighted that most of Asia and the Pacific are experiencing faster economic growth than in the latter half of last year.

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