BPI forecasts 6.3% PH 2025 economic growth, topping 2024

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The Philippine economy may grow a further 6.3 percent this year, right within the 6 and 6.5 percent target range by the government for 2025 and above the growth rate in the third quarter last year, with household consumption remaining brisk despite the slowdown in many global economies, a major local bank’s economist said.

The latest available official data for gross domestic product (GDP) for the Philippines showed growth at 5.2 percent for the third quarter of last year. Fourth quarter and full-year 2024 GDP figures are due out next month.

Jun Neri, lead economist for Bank of the Philippine Islands (BPI), said “the factors sustaining consumption over the past decade, such as remittance inflows, have remained in place despite the economic slowdown in major economies.”

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“Remittances also have a strong track record of stability and growth, even in times of crisis, as seen during the pandemic,” Neri said in a report on Thursday. 

Growth boosters

Remittances from overseas Filipinos through banks posted a steady increase of 3.3 percent in November, boosting the cumulative 11-month total to $31.113 billion, the highest on record for the period so far, data from the Bangko Sentral ng Pilipinas (BSP) released on January 15 showed.

This compares with the January to November 2023 level of $30.211 billion.

For November alone, cash remittances reached $2.81 billion, up 3.3 percent from $2.72 billion recorded a year earlier.   But compared with October, remittances dropped 8.8 percent from $3.079 billion. November’s drop is also the lowest in six months, according to the BSP data. 

“With aging populations abroad driving demand for labor, the impact of headwinds on remittances, like trade barriers and anti-immigration sentiment, is likely to be limited,” Neri said. 

Election spending this year — given that 2025 is an election year — is another tailwind that could provide a boost to the economy, Neri said.  

“Historically, GDP growth is faster in election years, driven by heightened economic activity fueled by election-related spending

in various regions,” he said.

Another factor supporting consumption, according to Neri, is the country’s low unemployment rate, with services accounting for most of the jobs.

“This should continue to drive growth in household income and the expansion of the middle class. While the emergence of artificial intelligence has raised concerns about the labor market,

a significant displacement of workers is unlikely since its current adoption remains limited and companies are still evaluating its commercial use,” Neri said, adding that in certain cases, AI “might even enhance labor productivity for companies that can effectively utilize it, providing a boost to growth.”

Manageable inflation

Neri also expects consumer spending “to show stronger growth this year, with inflation now at manageable levels.”

“This improvement will likely be most apparent in discretionary spending after a period of slower growth caused by high inflation, as consumers focus more on essentials,” Neri said.

When the Philippine Statistics Authority released the third-quarter GDP results, it pointed to household consumption expenditure as a top driver with a 5.1 percent year-on-year increase in the quarter. Consumer spending accounts for at least 70 percent of the economy.

“The economy also stands to benefit from the recent reduction in interest rates and provision of additional liquidity through the reserve requirement ratio,” Neri said, adding that the BSP has room to cut interest rates further this year.

Private sector spending in construction activities has not yet returned to pre-pandemic levels, he pointed out.

“Lower interest rates may fast-track its recovery.  Moreover, as household consumption strengthens, businesses are likely to increase capital spending to meet growing demand,” Neri said.

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Neri sees inflation remaining within the BSP target in the coming months, “assuming no unexpected supply shocks.”

Upside risk

“Upside risks to this outlook include the possibility of La Nina and disruptions to global supply chains due to trade barriers. Inflation remains sensitive to adverse weather conditions, particularly for vegetable prices, which warrant close attention,” Neri said.

“With the outlook for inflation remaining favorable, the BSP has room to cut interest rates further this year. However, global uncertainties may limit the extent of monetary easing,” Neri said.

He added that rate cuts in the first half of the year appear feasible, but the latter half may bring challenges as the US Federal Reserve could shift its policy stance in response to President Donald Trump’s policies.

“We see the BSP cutting by 50 bps as the most probable scenario this year, which will bring the policy rate to 5.25 percent,” Neri said.

PH top performer in Asean

Malaya Business Insight reported earlier that global bank HSBC said economies from Southeast Asia will deliver robust GDP growth of 4.8 percent in 2025, with the Philippines among the top performers.

James Cheo, HSBC’s chief investment officer for Southeast Asia and India under the bank’s global private banking and wealth segment, said robust domestic consumption and investment will be the country’s main driver of growth.

“The Philippines’ economic growth in 2025 will be driven by robust domestic consumption, a thriving business process outsourcing (BPO) sector, and increasing investments in digital services,” Cheo said, without giving a country-specific figure for the bank’s GDP forecast.

Cheo stressed the country’s unique strength in services exports, including IT (information technology) and BPO (business process outsourcing) services, provides a buffer against global trade uncertainties and tariff risks.

“Household consumption is expected to return to pre-pandemic growth rate, supported by easing inflation, a strong labor market, and increased infrastructure spending,” Cheo said.

Services exports and overseas remittances, “which remain key economic pillars, will continue to contribute significantly to economic resilience and stability in the Philippines,” he added. (with additional background reporting by Angela Celis)

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