Phl economy to accelerate to 6% growth in Q4

The Philippine economy is expected to grow at a faster rate of 6% in the fourth quarter, up from 5.2% in the previous quarter, driven by strong domestic demand, easing inflation, and supportive monetary policies, according to Citi economist Nalin Chutchotitham. 

In a report released early last week, Chutchotitham noted that these factors, along with the recent reduction in the reserve requirement ratio (RRR), are anticipated to boost credit expansion and maintain growth momentum.

“We expect growth to pick up to 6% in Q4, supported by stronger domestic demand that is likely to be bolstered by lower policy rates and inflation, as well as the recent RRR cut that would continue to support credit expansion,” Chutchotitham said.

The recently enacted Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) law is also expected to help attract both private sector and foreign direct investments (FDIs). 

The law includes several provisions, such as a reduction in the corporate income tax rate from 25% to 20%, additional deductions on power expenses, and a streamlined process for value-added tax refunds. 

These reforms, according to Chutchotitham, are expected to sustain the upward trend in private sector investments and FDIs, contributing to long-term economic growth.

Meanwhile, the Bangko Sentral ng Pilipinas (BSP) has reduced policy rates by 50 basis points this year and cut banks’ reserve requirement ratio by 250 basis points. 

These actions have injected additional liquidity into the banking system, further stimulating credit growth. Inflation remains well within the government’s target range of 2% to 4%, settling at 2.3% in October, supporting consumer spending and overall economic stability.

“Household consumption is expected to continue improving, supported by a lower interest rate and improved consumer sentiment as inflation continues to stabilize,” Chutchotitham added.

The country’s infrastructure projects are also expected to accelerate in the fourth quarter of 2024 and into early 2025, complementing private sector activity and contributing to overall economic performance.

For 2024, the Philippine economy is projected to grow by 5.8%, with an expected acceleration to 6.0% in 2025, underscoring the country’s continued recovery and strong domestic activity. These developments highlight the resilience of the Philippine economy and its potential for continued growth amid global uncertainties.