The projected decline in interest rates could boost local demand for cars, boding well for the consumption-reliant Philippine economy, BMI Research said.
In a commentary released on Friday, BMI raised its 2024 growth forecast for vehicle sales in the Philippines to 466,500 units, or an 8.5 percent growth.
The rosier outlook for the automobile industry paints a good economic picture for the Philippines. After all, car sales are widely used by policymakers, including the central bank, as an indicator of economic health.
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This is because the Philippine economy historically gets about 70 percent of its power from consumption, and heightened purchases of big-ticket items like cars have a big contribution to gross domestic product (GDP).
Citing data from the Asean Automotive Federation (Asean Autofed), BMI said local vehicle sales in the first seven months of 2024 rose by 10.9 percent to 265,610 units, significantly higher than the 239,501 units sold in the same period in 2023.
The strong economic growth has contributed to the “stronger-than-expected” rise in vehicle demand in 2024, the Fitch unit said. Government data showed the economy grew 6.3 percent in the second quarter, faster than the 5.7-expansion in the preceding three months.
To give the economy more juice, the Bangko Sentral ng Pilipinas (BSP) slashed its policy rate by 25 basis points to 6.25 percent, kicking off a “calibrated” easing cycle. But the rate cuts typically work with a lag that lasts for nine to 12 months. That said, the BSP stressed that the “relevant policy horizon” is 2025.
”For 2025, we anticipate that reduced borrowing costs will continue to support
the growth of the passenger car segment, as households respond favorably to lower financing rates,” BMI said.
But BMI said total car sales growth is still expected to sharply ease to 2.5 percent next year amid moves to impose excise taxes on pickup trucks.
”The outlook for 2025 is less optimistic due to the anticipated reintroduction of excise taxes on pickup sales, which will dampen growth in the commercial vehicle segment and overall vehicle sales,” the Fitch unit said. —Ian Nicolas P. Cigaral