AMRO trims PHL growth forecasts

The ASEAN+3 Macroeconomic Research Office (AMRO) trimmed its Philippine economic growth forecast for this year and in 2025, amid slowing external demand.

In its latest update, AMRO sees the Philippine gross domestic product (GDP) expanding by 6.1% this year, slightly lower than the 6.3% in the April report.

Despite the downgrade, this is still faster than the 5.5% GDP growth in 2023, and within the government’s 6-7% target for this year.

“We have shaved down the growth for not just the Philippines but many of the countries in the region. The recovery in the external sector was weaker than expected,” AMRO Chief Economist Hoe Ee Khor said in a virtual briefing on Tuesday.

“We may revise it up in the second half if the data show that the economy becomes more strongly,” Mr. Khor said.

AMRO also downgraded its GDP growth forecast for 2025 to 6.3% from 6.5% in the previous report. This is within the government’s 6.5-7.5% goal for next year.

Mr. Khor said Philippine growth has been weakened by gaps in infrastructure.

“I think the government is very conscious of that and is trying to fill the gap. Unfortunately, fiscal space has been used up to some extent during the pandemic,” he said.

The Philippine government aims to spend PHP 1.47 trillion on infrastructure this year. The Marcos administration has committed to maintaining high investments in infrastructure or around 5-6% of GDP from 2024 to 2025.

To complement domestic savings, the Philippines still has “a mo00derate business space” to attract more foreign investments. However, its economy remains one of the most restrictive in the region, Mr. Khor said.

“We think the policy measures by the government will continue to attract more investment, and also with the improvement in infrastructure gap, will help to lift the (Philippines’) growth potential,” he said.

Also, AMRO lowered its inflation forecast for the Philippines to 3.3% for this year from 3.6% in the April report. It raised its inflation projection to 3.1% for 2025 from 2.9% previously.

AMRO said the BSP may maintain a tight monetary policy until a downward trend in inflation is sustained.

Despite this, the Philippines is still projected to be the second-fastest growing economy among Association of Southeast Asian Nations (ASEAN) members this year, behind only Vietnam (6.3%).

Philippine growth is expected to be ahead of Cambodia (5.6%), Indonesia (5.2%), Malaysia (4.7%), Laos (4.5%), Brunei (4%), Thailand (2.7%), Singapore (2.4%), and Myanmar (1.8%).

AMRO sees the ASEAN+3 region, which includes China, Hong Kong, Japan and South Korea, expanding by 4.4% this year and 4.3% in 2025.

The ASEAN region is projected to grow by 4.8% this year and next year.

“External trade is set to return to positive territory this year, which will supplement strong domestic consumption and the continuing recovery in tourism,” AMRO said in the report.

AMRO said the global economy is expected to continue stabilizing next year, and monetary easing is seen to resume in major economies.

The think tank lowered its inflation forecast for ASEAN+3 (excluding Laos and Myanmar) to 2.1% for this year from 2.5% previously “due to softer-than-expected food prices in several economies and lower imported inflation.”

“Higher cost pressures could emerge in 2025 as economic momentum gains traction, but these are unlikely to trigger a large spike in ASEAN+3 inflation under the baseline scenario,” it said.

AMRO said the overall balance of risks to the outlook has improved since April, but several risks such as a spike in commodity and shipping prices and tighter-than-expected US monetary policy.

Other risks include a sharp slowdown in the US and Europe, weaker growth in China, and possible adverse spillovers from the US presidential election.

“The bad news is that the region’s outlook next year could be significantly affected by the outcome of the US elections. The good news is, the region has weathered similar shocks before,” Mr. Khor said.

The US presidential elections will be held on Nov. 5.

Also, AMRO said geopolitical tensions are becoming “more pertinent” for ASEAN+3 economies.

“The threat of geoeconomic fragmentation continues to rear its head as more economies announce trade controls or protectionist measures, following recent US tariff action against China. The ongoing shifts in global trade — including longer supply chains — can exacerbate the negative impact of these trade frictions, especially for ASEAN+3 economies, which are highly integrated in global trade,” AMRO said. — Beatriz Marie D. Cruz