Sun Life Philippines expects the economy’s growth to fall below six percent this year following the slowdown recorded in the third quarter.
Patrick Ella, economist at Sun Life Investment Management and Trust Corp. (SLIMTC) said in his presentation at the company’s event for the Canadian Trade Mission in Taguig on Thursday the economy is projected to grow by 5.6 percent this year.
This is below the government’s recently revised assumption of six to 6.5 percent for 2024.
For 2025, Sun Life sees a faster growth of 6.2 percent, which falls at the lower end of the government’s estimated band of six to eight percent.
“Third quarter GDP was slower at 5.2 percent but the great news is household consumptions has recovered back to 5.1 percent,” Ella said.
“It is very hard to see (a) six percent growth this year as Q4 will have to grow at least 6.5 percent,” he added.
Michael Enriquez, president of SLIMTC, attributed the company’s conservative outlook for the Philippines to the government’s spending performance.
Enriquez said SLIMTC will reconsider these projections “if the government is more aggressive on spending. “
“One of the key factors that drove lesser-than-consensus GDP was really the lack of government spending,” Enriquez said on the sidelines of the event.
While the Department of Budget and Management has been disbursing funds, Enriquez said the bottleneck appears to be in the implementing agency level.
“Consumer spending has gone down as well given that inflation (has) really eroded a lot of the purchasing power. Hopefully with inflation starting to go down and BSP (Bangko Sentral ng Pilipinas) very supportive on lowering their policy rate… we can revive consumer spending,” Enriquez said.
Enriquez said if the government is keen on hitting the higher-end target of eight percent over the medium-term, they need to spend on the critical infrastructure projects identified.
Meanwhile, inflation is seen to ease to 3.3 percent this year and 2.8 percent in 2025.
“We see inflation returning to more stable ranges as well as stable supply for rice in 2025,” Ella said.
Risks to this forecast are another food supply problem or commodity price spikes.
By yearend, the foreign exchange rate is seen at P57 to P58 to a dollar, with the peso seen to appreciate to 54 to 57 next year.
“The recent weakness in the peso was due to US election uncertainty and markets wanting a large Fed cut. But post-election, we seen $/P to end at P57 to P58 range this year,” Ella said.
“We expect BSP to cut 75 basis points (bps) in 2024 and 100 bps next year. Cooling inflation and a Fed cutting rates will give much room for BSP to steadily cut rates,” he added.
Meanwhile, Enriquez was also asked about the possible impact of the calls for impeachment against the vice president on investor sentiment.
“I don’t see any (impact). I think this is not the first time that we’ve seen a lot of these what we call political posturing, especially towards the midterm elections,” Enriquez said.
“A lot of what’s happening in the market is not really politically driven. I’ve spoken to some of the investors here or potential investors, they don’t really look at what’s happening in our politics as something alarming. I think for us, it’s more of noise,” he added.
