Philippines’ 2024 GDP growth may fall short of gov’t target — BPI

BANK of the Philippine Islands (BPI) expects gross domestic product (GDP) growth of 6.2% this year, short of the official government target.

“While significant uncertainties remain, the country may maintain its position as one of the fastest-growing economies in the region with a full year growth rate of 6.2% in 2024,” BPI said in a statement.

BPI’s forecast is below the government’s 6.5-7.5% target range for GDP growth this year.

GDP growth accelerated to 5.9% in the third quarter, bringing the nine-month average to 5.5%, still below the government’s 6-7% full-year target.

“With the anticipated easing of 2024 inflation, consumer spending may recover in 2024,” BPI said.

The bank sees headline inflation averaging 3.7% this year, within the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target, but cited upside risks like El Niño, which may reduce food harvests and send prices higher.

Inflation is expected to rise again in the second quarter, breaching 4%, before settling within the BSP’s 2-4% target range in the second half.

Inflation slowed to 3.9% in December, settling within the central bank’s 2-4% target for the first time in nearly two years, and easing from 4.1% in November and 8.1% a year earlier. This also was the lowest reading in 22 months or since the 3% posted in February 2022.

Inflation averaged 6% for 2023 from 5.8% in 2022, marking the second straight year of inflation breaching the BSP’s 2-4% target.

BPI sees investment spending ramping up this year, driven by the construction sector and with companies becoming more aggressive in capital expenditures on the expectation that interest rates have peaked. 

“Public construction will continue to be a major driver of capital spending as the government ramps up its infrastructure program, including the implementation of its Build, Better, More (BBM) projects,” BPI said.

BPI sees the BSP keeping rates steady until the second half until inflation is firmly within the central bank’s target, before mirroring the Federal Reserve’s easing cycle.

“So far, Fed officials have signaled the possibility of rate cuts amounting to 75 bps (basis points) in 2024. We also expect a 75-bp cut from the BSP this year, which will bring the policy rate to 5.75% by end-2024,” BPI said. — Aaron Michael C. Sy