Philippines to emerge as ASEAN growth leader in 2025

The Philippine economy may zoom to its fastest pace since 2018 and lead the Southeast Asian region in growth next year, financial services provider Unicapital Group said in a report by Philippine Star.

In a report, Unicapital said gross domestic product (GDP) growth could hit 6.3 percent next year, making the Philippines one of the fastest-growing economies in Asia Pacific.

“We are confident that there are opportunities for the Philippines despite the risks. We have seen similar circumstances in the past but with the government stepping up to ensure measures are in place to boost the equity market, everything will fall into place and yield positive results,” Unicapital Group president and CEO Jaime Martirez said.

Among the new laws seen improving the overall financial incentives and providing a positive boost to the Philippine equity market is the recently signed Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating Economy (CREATE MORE), which is an amendment to the CREATE Act, in a bid to offer a globally competitive tax regime.

Unicapital said the law’s incentives, including tax reductions and increased foreign ownership limits, would likely drive both domestic and foreign capital inflows, particularly into sectors poised for growth.

“The government’s signing of the CREATE MORE law is timely in further institutionalizing actions that will enhance corporate profitability,” Martirez said.

Meanwhile, Unicapital is putting its house call on inflation at 3.1 percent, driven by expectations of lower global oil prices.

Unicapital said that the CREATE MORE law also has a provision to cut corporate income tax rate to 20 percent from 25 percent, while export-oriented consumer companies are positioned to gain from VAT zero-rating on local purchases and essential services.

It said the reduction in tax burden would create more allowance for companies to open more jobs and fuel economic activities.

“Lower inflation and an increase in the employment rate will ultimately lead to growth in household spending, which is a key growth driver for consumer companies,” it said.

Unicapital also sees a bottom-up index target of 8,000 for the Philippine Stock Exchange index. This implies a 14 percent year-on-year gain from the estimated 7,000 level by the end of 2024.

According to Unicapital, further policy rate easing is expected to boost corporate earnings through a lower cost of capital and increased consumer spending.

“This is supported by the anticipated further reduction in policy rates by the BSP. However there are downside risks to this including prolonged elevated interest rates and escalation of geopolitical tensions that disrupt the trade supply,” it said.