S&P raises PH growth forecast

by Nov 28, 2023Featured Article, News

THE Philippines will be one of the strongest-performing Asia-Pacific economies this year with growth likely to be higher than previously forecast, revised projections issued by S&P Global Ratings showed.

The debt watcher, in a November 26 report that said growth in the region for this year and the next “should be strongest in emerging market economies with solid domestic demand,” raised its 2023 Philippine growth forecast to 5.4 percent from 5.2 percent previously.


Makati Central Business District. PHOTOS BY J. GERARD SEGUIA

The outlook for 2024 was trimmed to 5.9 percent from 6.1 percent. That for 2025 was kept at 6.2 percent and S&P forecast a 2026 improvement to 6.4 percent.

All projections are lower than last year’s 7.6-percent growth result and also fall below the government’s 6.0-7.0 percent and 6.5-8.0 percent targets for this year and 2024-2028.

“Asia-Pacific as a whole continues to grow despite meager support from external sources,” S&P said, also noting that “China is coping while its neighbors step up.”

The region is now projected to grow by a stronger 4.7 percent this year instead of 4.3 percent while China is also expected to post improved growth of 5.4 percent — matching that of the Philippines — and not just 4.8 percent as earlier thought.

India will lead regional growth for this year up to 2026, S&P said, with successive growth rates of 6.4 percent, 6.9 percent and 7.0 percent.

While China’s outlook has improved, its property woes are expected to continue to weigh on the economy with growth forecast to drop to 4.6 percent next year, 4.8 percent in 2025 and 4.6 percent in 2026.

Developed economies outside of China, meanwhile, have been buoyed by robust labor markets and service sectors while emerging markets “gained support from the post-pandemic resumption of the earlier robust domestic demand trend.”


In addition to the Philippines and India, S&P expects Indonesia and Malaysia to also post strong domestic demand-led growths of 5.0 percent and 4.0 percent, respectively, for this year and 4.9 percent and 4.5 percent in 2024.

The ratings agency noted that inflation was easing in most Asia-Pacific economies, reducing the need for further interest rate hikes. However, the Philippines, Australia, and India were cited as exceptions and rising prices were tagged as a key risk to their growth outlooks.

“In Australia, India, and the Philippines, lingering inflation risks are keeping central banks occupied,” S&P said, adding that “government plans to expand fiscal policies in several countries could complicate central banks’ policymaking.”

“Risks remain but so too does the potential for growth in the region. In coming months, the spotlight may shine a little more brightly on emerging markets where domestic demand is strong.”

S&P expects Philippine inflation to average 5.9 percent this year, up from 5.8 percent last year and breaching the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 4.0-percent goal. The rate, however, is expected to fall back to the target range at 3.4 percent next year, 3.2 percent in 2025, and 3.0 percent in 2026.

The BSP is also likely to raise the key interest rates anew one more time this year, the ratings agency said, pegging a year-end policy rate of 6.75 percent from the current 6.5 percent.

This will likely be cut to 6.0 percent by the end of next year, followed by further reductions to 4.25 percent in 2025 and 4.0 percent in 2026.

The BSP, which has raised interest rates by a total of 450 basis points since May of last year to combat inflation, ordered an unscheduled 25-basis point in October and then paused in November. Its last policy meeting this year will be on December 14.

The peso-dollar rate, meanwhile, is expected to hit P56:$1 by the end of this year, P53.50:$1 in 2024, P51.90:$1 in 2025, and P50.80:$1 in 2026.

Unemployment, lastly, was forecast to moderate to 4.6 percent this year from 5.4 percent in 2022, stay unchanged in 2024, and ease further to 4.2 percent and 4.1 percent in 2025 and 2026.