COULD increase the Philippines’ gross domestic product (GDP). less than the government target until 2025, said Citigroup, Inc. (Citi).
Citi lowered its GDP growth forecast for the Philippines to 5.8% this year but maintained its 6% growth forecast for 2025.
This is below the government’s target of 6-7% this year and 6.5-7.5% next year.
“We have lowered 2024 GDP growth slightly from 6% to 5.8%, mainly due to the slowdown in the third quarter caused by several short-term, weather-related conditions,” said Citi Thailand and Philippines economist Nalin Chutchotitham. report.
The Philippine economy shrank to 5.2% in the July to September period from 6.4% in the second quarter and 6% last year.
This was also the weakest growth since the 4.3% growth in the second quarter of last year.
“However, we think it would be misleading to view the weak growth in the third quarter as the beginning of a slowdown as several negative factors in the third quarter are one-off events,” said Ms. Chutchotitham.
He said the weakness of economic growth in the third quarter was due to the decline in agricultural production, construction and net exports.
Despite a weak third quarter, Citi expects growth to accelerate in the fourth quarter as domestic demand appears to be picking up due to easy entryflevel and low levels.
“We expect GDP growth for the fourth quarter of 2024 to increase to 6% year-on-year. Household consumption is expected to continue to improve, supported by low interest rates and improved consumer sentiment as beforefthe relationship continues to stabilize.”
Of fIn the first nine months, GDP grew by 5.8%. The economy will need to grow at least 6.5% in the fourth quarter to meet the government’s lower target of 6-7%.
“With the hurricane season quickly approaching, we also expect progress on infrastructure projects to continue rapidly in the fourth quarter and fthe first quarter of 2025,” said Ms Chutchotitham.
Domestic demand will be sustained by improving employment conditions, growth in remittances and bank lending.
“RRR (reserve requirement ratio) has been decided by 250 points (bps), effrom October 25, it will release more money from the banking system and may continue to support strong credit expansion,” Ms. Chutchotitham added.
The central bank last month cut the RRR for global and commercial banks and non-banking financial institutions with banking-like activities by 250 bps to 7%.
“We also maintain our expectation of growth of 6% in 2025 but we see some risks due to the decline in the high level,” said Citi.
The Bangko Sentral ng Pilipinas (BSP) may decrease by 25 bps in December and a total of 75 bps next year, according to Citi.
This year so far, the central bank has cut interest rates by 50 bps since August. The Monetary Board is scheduled to hold its final rate-setting meeting for the year on Dec. 19.
BSP Governor Eli M. Remolona, Jr. he said it was possible to deliver a 25-bp rate cut at that time. This would bring the rate to 5.75% by the end of 2024.
“Looking forward, the recent CREATE MORE (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy) bill should help reduce business costs with a lower corporate income tax, greater deductions for electricity costs, and a simpler local tax. and VAT laws,” said Ms. Chutchotitham.
Last week, President Ferdinand R. Marcos, Jr. signed the CREATE MORE bill.
The law expands financial incentives and lowers corporate income taxes for certain foreign businesses.
“In responding to the post-pandemic world, the law of CREATE MORE allows you to fencourages special economic zones to create flexible/mixed applications while continuing to enjoy their other incentives,” he added. – Luisa Maria Jacinta C. Jocson
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