MANILA: Philippine economic growth is expected to strengthen this year amid easing inflation and a less restrictive monetary policy, the ASEAN+3 Macroeconomic Research Office (AMRO) said. In a report released on Monday, AMRO said the growth of the Philippine economy is projected to hit 5.8 percent this year from 5.5 percent in 2023.

According to Philippines News Agency, the report is based on AMRO’s Annual Consultation Visit to the Philippines from August 27 to September 6, and data and information available up to November 7. AMRO expects Philippine economic growth to further accelerate to 6.3 percent in 2025. “The upturn in 2024 is based on higher government spending, particularly in infrastructure,” it said.

AMRO explained that private consumption is also expected to sustain its growth momentum in the fourth quarter, backed by strong labor market conditions, lower inflation, and robust overseas remittances. Exports of IT-Business Process Management and the improvement in merchandise exports are also expec
ted to boost economic growth.

Inflation is forecast to decelerate to 3.2 percent this year and in 2025 from 6 percent in 2023. “Headline inflation will likely continue to slow down in the second half of 2024 amid lower commodity prices, particularly for food and energy, and tariff cuts on imported rice from July, although upside risks remain, such as wage increases and local food supply shocks,” AMRO said.

However, AMRO noted that there are risks to growth, including higher inflation which could dampen consumption and the potential for a sharp slowdown in major trading partners. “Heightened geopolitical risks could increase the likelihood of global supply disruptions and lead to a resurgence of inflationary pressure,” AMRO stated. It added that long-term potential growth could be challenged by insufficient infrastructure investment, vulnerabilities to climate change, and the prolonged effects of the pandemic.

AMRO stated that the country’s current fiscal-monetary policy mix is appropriate and can be adjust
ed further to support economic growth while rebuilding policy buffers. “If inflation continues to ease within the BSP target band, there is room to adopt a less restrictive monetary policy stance,” it said. To recall, the Bangko Sentral ng Pilipinas (BSP) already reduced policy rates by a total of 50 basis points this year.

AMRO recommended that a whole-of-government approach should be taken to address inflationary pressures if supply-side risks emerge. The pace of fiscal consolidation should also be accelerated “when conditions allow.” “Further revenue mobilization, efficiency improvement in expenditure and long-term fiscal reforms should continue to be carried out,” it said.