Analysts paint rosier economic picture for 2024

The country’s strong economic growth is likely to be sustained this year on the back of rising exports and robust private consumption, according to the Department of Trade and Industry as well as private banks.

“While the Philippine economy performed well despite geopolitical challenges in 2023, we are rallying for an even better outlook this year,” DTI Secretary Alfredo Pascual said at the Italian Chamber of Commerce in the Philippines Inc. business luncheon yesterday.

Pascual said the country’s 5.6-percent gross domestic product (GDP) growth in 2023 was faster than major economies in Asia, such as China’s 5.2 percent, Vietnam’s five percent and Malaysia’s 3.8 percent.

“Growth in 2024 will be driven by private consumption as inflation is expected to return within the low target range, falling oil prices, robust public spending, greater investments lured by the country’s sound macroeconomic fundamentals, investmentgrade credit ratings, and the implementation of structural reforms; and increased demand for Philippine exports as supply chain bottlenecks ease,” Pascual said.

The DTI secretary said a broad-based expansion in all major sectors of the economy led by services and industry is expected to drive growth on the supply side.

“Strong foreign direct investment and macroeconomic prospects make countries more attractive to investment,” he added.

He said consulting firm fDi Intelligence expects the Philippines to be a standout destination for foreign direct investments this year.

Pascual said the Philippines aims to become a regional hub for smart and sustainable manufacturing and services, leveraging its young and talented workforce, rich natural resources and strategic geographic location.

According to Pascual, the government is leveraging on the significant investment opportunities offered by key strategic sectors, including green metals, green minerals and renewable energy.

He also identified opportunities in mineral exploration, processing and battery production, recognizing the Philippines’ potential to contribute significantly to the electric vehicle (EV) industry.

Pascual also presented investment opportunities in key areas such as semiconductors, information technology (IT) infrastructure, agribusiness, IT and Business Process Management and creative industries.

For its part, BMI, a unit of Fitch Solutions, expects the Philippine economy to grow at a faster rate of 6.2 percent this year from 5.6 percent in 2023.

BMI said fixed capital investment contribution rose to 2.2 percent in the fourth quarter of 2023 from 1.8 percent in the prior quarter, even as the Bangko Sentral ng Pilipinas (BSP) maintained the benchmark rate at 6.5 percent, the tightest in 16 years.

BMI said businesses are likely improve their investment activities in the country once the BSP starts cutting interest rates.

Ayala-led Bank of the Philippine Islands (BPI) projects the economy to expand by 6.3 percent in 2024, sharing BMI’s outlook that consumer and investment spending are bound to recover.

BPI said inflation should temper in the first quarter but accelerate in the second quarter, raising the possibility of even crossing the four percent level again.

“Average inflation for the year is expected to settle at 3.7 percent. The BSP might be able to cut interest rates in the second half of 2024, which can provide relief to those who borrowed heavily before the 2022 rate hikes,” BPI said.

Likewise, Ty-led Metropolitan Bank and Trust Co. also expects inflation to cool down in the coming months.

The listed bank believes that the BSP would bring down interest rates this year, encouraging businesses and consumers to spend as borrowing will become cheaper.

“[The] bank retains its fullyear average GDP forecast of six percent on the back of decelerating inflation and interest rate cuts,” Metrobank said.