Manila: Philippine economic growth is expected to accelerate in the fourth quarter of the year to 6 percent from 5.2 percent in the third quarter driven by a strong domestic demand, easing inflation, and lower policy rates, an economist from Citi said. “We expect growth to pick up to 6 percent in Q4 (fourth quarter), supported by stronger domestic demand that is likely to be bolstered by lower policy rate and inflation, as well as the recent RRR (reserve requirement ratio) cut that would continue to support credit expansion,” Citi economist for the Philippines and Thailand Nalin Chutchotitham said in a report released on Monday.

According to Philippines News Agency, the recent enactment of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) is anticipated to bolster private sector and foreign direct investments. This legislation cuts the corporate income tax rate to 20 percent from 25 percent, offers additional deductions on power e
xpenses, and streamlines the value-added tax refund processes.

The Bangko Sentral ng Pilipinas (BSP) has made significant policy adjustments, cutting policy rates by a total of 50 basis points this year. Additionally, the reduction of banks’ RRR by 250 basis points is expected to release more liquidity into the banking system, which is likely to continue supporting robust credit expansion.

Inflation remains well within the government’s target range of 2 to 4 percent, having settled at 2.3 percent in October this year. “Household consumption is expected to continue improving, supported by a lower interest rate and improved consumer sentiment as inflation continues to stabilize,” said Chutchotitham.

Infrastructure projects are projected to advance more rapidly in the fourth quarter of 2024 and into the first quarter of 2025. Looking ahead, the full-year economic growth for 2024 is projected to settle at 5.8 percent, with expectations to accelerate further to 6.0 percent in 2025.