The Philippines is projected to grow by 5.8 to six percent this year and by 6.1 percent next year, according to a study published by government think tank Philippine Institute for Development Studies (PIDS).
The preliminary discussion paper titled, Macroeconomic Prospects of the Philippines in 2024–2025: Toward Upper Middle-Income Status, said growth this year will be driven by continued government spending on infrastructure development but hampered by the damage of recent natural calamities.
The PIDS study’s growth estimate for 2024 falls at the lower end of the Development Budget Coordination Committee’s assumption of six to seven percent for 2024, while the 2025 outlook falls below the government’s official assumption of 6.5 to 7.5 percent for next year.
The economy’s growth in the first nine months of the year has averaged 5.8 percent. The report expects fourth quarter growth to reach six percent.
PIDS’ projection for 2025 is anchored on the dynamics of various forces on the demand-side, particularly the expectations of easing inflation and policy rates that will reinforce both consumption and investment activities of the private and public sectors.
“The optimism for 2024 and 2025 growth is impeded by downside risks from the global economy such as geopolitical threats, deteriorating economic conditions of key partners, and the worsening of overall external conditions; as well as domestic headwinds such as unclear fiscal and monetary policies, lack of access to credit, domestic competition, labor problems, threats of natural calamities, volatilities in exchange rate, among others,” the discussion paper said.
Meanwhile, headline inflation is seen to likely slow down to 3.6 percent on average this year from the six percent average in 2023, then settle to within target range in 2025.
“Outlook on Philippine GDP growth remains volatile, uncertain, complex, ambiguous and disruptive as indicators remain conditioned on economic policies to be implemented by global powers and how responsive the economy would be,” the report said.
While the Philippines had above-expectation results in the first half of 2024, the discussion paper said it remained to be short of the required growth for the Philippines to be escalated to an upper middle-income economy by 2025.
“To do this, the economy must be able to increase per capita gross national income (GNI). By sustaining at least a six to seven percent GDP growth, accompanied by continued growth in net factor income from abroad through remittances and overseas investment income, GNI can increase alongside the current decline in average annual population growth rate,” the report said.
According to the Philippine Statistics Authority, the average annual population growth rate is estimated to decline from 0.84 percent for 2020 to 2025 to 0.35 percent for 2050 to 2055.
“Hence, to increase per capita GNI towards upper middle-income status, the growth of GNI must be significantly faster than population,” it said.
