MANILA, Philippines —The Marcos administration would still have a hard time hitting its watered-down target this year amid external headwinds that also weighed on the Philippines’ regional peers, said BMI, a unit of the Fitch Group.
“Still, we think that the government’s growth target of 6.5 to 7.5 percent will be difficult to achieve,” BMI said in a commentary sent to journalists. The Fitch unit forecasts the economy to grow 6.2 percent in 2024.
”Like many of its regional peers, a deteriorating external demand picture will exert the biggest drag on the Philippines’ economy,” it added.
READ: World Bank sees below-target growth for PH in 2024, 2025
Economic managers cut their growth target for this year from the previous goal of a 6.5 to 8 percent expansion amid a high interest rate environment and threats from a prolonged El Niño weather phenomenon, which can stoke inflation by pushing up energy and food prices.
2023 growth missed goal
Last year, the Marcos administration failed to hit its 6 to 7 percent growth target after the economy grew at an annualized 5.6 percent, albeit still one of the fastest economic expansions in Southeast Asia in 2023.
But BMI said the impact of external headwinds on the Philippine economy can be seen on the 2023 gross domestic product data, which showed that merchandise export fell 14 percent year-on-year in the fourth quarter.
“We think that a turnaround is unlikely given that our team is forecasting global growth to edge down from 2.6 percent in 2023 to 2.2 percent in 2024,” the Fitch unit said.
READ: Global economy will slow for third straight year in 2024 —World Bank
“To be sure, the Philippines’ major trading partners are also facing significant headwinds of their own. A shallow recession in the United States and a poorer economic outlook in Mainland China, which together account for about one-third of total exports, bodes poorly for the Philippine external sector,” it added.
Moving forward, BMI said the Philippine economy would draw its strength from improving demand conditions at home.
“For starters, slowing inflation will boost household spending,” BMI said. “On top of that, labor market conditions are very tight by historical standards and the unemployment rate is now at record lows.” —Ian Nicolas P. Cigaral