PH GDP growth seen picking up pace in 2025
The country’s economy could expand at a faster pace this year compared to 2024 due to the typical boost from elections, although an all-out global trade war could drag growth below the government’s target.
Speaking to reporters on Wednesday, Angelo Taningco, chief economist at Security Bank Corp., said gross domestic product (GDP) expansion this year could average 6.1 percent, with much of the support likely emanating from election-related spending.
If Taningco’s prediction comes to pass, GDP growth this year would be faster than the 5.6-percent clip in 2024, which fell short of both market consensus and the Marcos administration’s target of 6 to 6.5 percent.
At the same time, a 6.1-percent growth this year would settle within the 6 to 8 percent target band of the government for 2025 until the end of President Marcos’ term in 2028.
Apart from the usual boost from elections, lower borrowing costs could also translate to stronger consumption, a traditional growth driver.
That said, Taningco projected the Bangko Sentral ng Pilipinas (BSP) to further cut the policy by a half-percentage point this year, which would be split into two quarter-point cuts each at the June and October meetings of the Monetary Board.
But while there are “so many upsides” to growth this year, the Security Bank economist warned that a full-blown global trade war could be damaging to the domestic economy.
“But it depends on the magnitude of the trade war,” Taningco said.
Tariff policies
Meanwhile, Swiss banking giant UBS Investment Bank Global Research was not as optimistic as Taningco.
At a press briefing, Grace Lim, UBS Asean and Asia senior economist, said improving domestic demand and consumption despite aggressive tariff policies abroad will likely speed up growth this year to 5.9 percent. This suggested that the Philippine would outperform the 5-percent average growth that UBS projected for Asean-6 this year.
But if realized, GDP expansion in 2025 would miss the Philippine government’s target for the third straight year.
“Consumption should be aided by the tailwinds of solid labor income growth and gradually easing food inflation, which has already played out in the second half of 2024,” Lim said.
Lim likewise expected both investments, which account for 23 percent of Philippine GDP, and consumption, which accounts for 73 percent, to accelerate this year.
While the threat of US President Donald Trump’s latest import tariff policies looms, Lim pointed out that the Philippines was “a rather defensive market in the event of potential trade tariff escalation.”
This is especially because the Philippines was domestically oriented, she said.
According to the Philippine Statistics Authority, the below-target growth last year was due mainly to the onslaught of typhoons in the latter half of the year, thus muting economic activity.
Food price inflation was also among the main culprits.
Lim recognized that there was “potential volatility” in inflation, “stemming from food supply shocks.”
“In the first two months of the year, we did see potential risk from food prices, particularly vegetables,” Lim said.
Consumer sentiment
“That might have weighed a bit on consumer sentiment, so that is a risk, but not one we can always predict with certainty due to weather-related factors.”
At the same time, however, she pointed out that overall inflation “has come back to target,” and this was a crucial tailwind that could push economic growth toward the target.
The services sector, along with the business process outsourcing industry, also had the potential to propel growth.
Lim likewise noted that despite the recent pause, the BSP had room to cut the benchmark rate for overnight borrowing in April and September, for a total of 50 basis points.
“The pause on rate cuts was warranted due to trade policy uncertainties, and given that past easing was working its way through the economy. There was room to reassess the situation first,” she said.
