S&P keeps 5.8% PH growth forecast for 2024
S&P Global Ratings retained its growth forecast for the Philippines this year and 2025.
The debt watcher kept the country’s gross domestic product (GDP) growth at 5.8 percent this year and 6.1 percent in 2025, as it hopes private consumption will pick up.
Both forecasts are still below the government’s 6 to 7 percent and 6.5 to 7.5 percent growth targets for 2024 and 2025, respectively.
Vishrut Rana, Asia-Pacific economist at S&P, said that the main factor influencing the economy’s growth for the rest of the year is whether consumer spending picks up or remains weak as this will decide if the country can reach the target growth of 6 percent.
“So for the moment, we have 5.8 percent. There’s some upside risk to that number,” Rana said during an online discussion.
In the second quarter, private spending grew by 4.6 percent, slower than the 5.5-percent growth in last year, making it the slowest growth after the pandemic.
S&P expects the economy to grow by 6.1 percent next year, mainly driven by a recovery in domestic spending and a return to normal monetary policy.
“That’s a good segue into the currency. So what we’ve seen over the last month is significant strength in global currencies, particularly Southeast Asia currencies against the US dollar,” he said.
“We’ve seen appreciation in the range of between one and a half to 3 percent against the dollar or several currencies. The peso also appreciated over that time period based on expectation of easing out of the US Federal Reserve,” Rana added.
The Bangko Sentral ng Pilipinas (BSP) on Aug. 15 cut its policy rate by 25 basis points (bps), reducing the key rate to 6.25 percent. This was the first rate cut in almost four years or since November 2020, during the height of the pandemic.
The Monetary Board indicated that the BSP will pursue a “calibrated” shift toward a more accommodative monetary policy. BSP Governor Eli Remolona Jr. explained that this means the current easing cycle will be “gradual,” and he did not rule out the possibility of another 25 bps reduction, potentially at the October or December policy meeting.
In the international scene, markets widely anticipate a rate cut at the US central bank’s meeting this month, following Fed Chair Jerome Powell’s dovish speech at the Jackson Hole Symposium.
“We expect two rate cuts out of the Fed this year, one in September, one later on towards the end of the year. So that’ll be the swing factor,”
Rana also mentioned that central banks in the region are expected to lower interest rates and likely to be followed by the BSP.
However, Rana noted that the cuts are expected to be moderate enough not to have a major impact on the local currency’s value.
