Economic growth likely faster in first quarter

Moody’s Analytics said the Philippines’ first quarter or end-March gross domestic product (GDP) growth likely hit 5.8 percent, faster from 5.6 percent in end-December 2023 due to positive trade performance and modest private consumption, according to a report by Manila Bulletin.

In its latest Economic Review for Asia Pacific, Moody’s said Philippine trade “should make a good showing on account of stronger semiconductor shipments and climbing international arrivals.”

Meanwhile, it noted that private consumption “will make modest gains, supported by a robust labor market and a healthy inflow of remittances, but high domestic borrowing costs will apply a speed limit on overall growth.”

Moody’s also expects Philippine April inflation will settle at 3.9 percent, higher than 3.7 percent in March, but still within the government target range of two percent to four percent.

Both data on consumer price index (CPI) and GDP will be released this week. The April inflation rate will be announced on May 7 while the GDP first quarter number will be released on May 9.

Full-year 2024, Moody’s forecasts 5.9 percent GDP growth. This was slightly lower compared to the Marcos administration’s target of six percent to seven percent for this year. In 2023, GDP grew by 5.6 percent.

In its most recent Asia Pacific Outlook report, Moody’s noted that the Philippines along with Vietnam and Indonesia will lead the region in terms of economic performance this year and in 2025.

For 2026, Moody’s projects Philippine GDP will grow by 6.1 percent, still lower than the government growth target of 6.5 percent to eight percent for 2026 until 2028.

Moody’s also expects Philippine inflation for this year will average at 3.5 percent, 3.2 percent for 2025 and a flat three percent for 2026.

The Bangko Sentral ng Pilipinas (BSP) expects a higher risk-adjusted inflation forecast for 2024 of four percent and 3.5 percent for 2025. These are all within the BSP target inflation two percent to four percent. 

Despite persistent upside risks to inflation which have also raised expectations, the BSP said these expectations have remained “broadly anchored”. 

The risks to the inflation outlook continue to lean toward the upside while possible further price pressures are linked mainly to higher transport charges, elevated food prices, higher electricity rates, and global oil prices. The potential minimum wage adjustments could also give rise to second-round effects, said the BSP.

For the April CPI, the BSP forecasts a range of 3.5 percent to 4.3 percent.

The BSP said the “continued price increases for rice and meat along with higher gasoline prices” as well as the exchange rate market where the peso has been depreciating past P57 are all sources of price pressures. 

For the first quarter, the inflation rate averaged at 3.3 percent.

The BSP had expected this inflation outturn in the first quarter which was due largely to negative base effects. However, the BSP said inflation could temporarily accelerate above the target range in the next two quarters of the year because of the El Nino weather conditions and its impact on domestic agricultural output and positive base effects.