Multilateral lenders expect the Philippines to be one of the fastest-growing economies in the region amid the looming global slowdown, but emphasized the need to boost labor productivity, infrastructure competitiveness, and climate resilience to ensure growth remains robust.
At the BusinessWorld Forecast 2024 economic forum on Wednesday, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand Ndiamé Diop said he is optimistic about the country’s growth prospects despite global headwinds.
“The Philippines have all (the) structural drivers that are very favorable and that’s why we’re quite optimistic about this. But given the state of the global economy, even 5.6% is a really decent growth rate. And I think if the global economy improves going forward, the ceiling grows even higher,” he said.
In October, the World Bank cut its gross domestic product (GDP) growth forecast for the Philippines to 5.6% from the 6% projection given in June. It also trimmed its growth forecast for the Philippines to 5.8% for 2024 from 5.9% previously. These are below the government’s 6-7% target for this year and 6.5-8% in 2024.
Asian Development Bank (ADB) Country Director for the Philippines Pavit Ramachandran said Philippine economic growth is at the “top of the leaderboard” in Southeast Asia.
In the third quarter, the Philippines’ 5.9% gross domestic product (GDP) growth in the third quarter was ahead of Vietnam (5.3%), Indonesia (4.9%), and Malaysia (3.3%).
However, the ADB trimmed its Philippine growth outlook to 5.7% this year from the 6% projection it gave in April. For 2024, the ADB expects the Philippines to be the fastest-growing economy in Southeast Asia with a 6.2% growth projection.
“The economy has largely remained resilient, notwithstanding global uncertainties, geopolitical tensions, economic headwinds, interest rates, inflation,” Mr. Ramachandran said.
“And a lot of (growth) is still very much anchored on domestic demand, household consumption and fixed investment both public and private investment in construction, remaining one of the biggest growth drivers,” he added.
However, the Philippines still needs to improve infrastructure competitiveness, enhance productivity and investments, nurture its demographic dividend, and intensify climate action.
Infrastructure development is also a hindrance to the Philippines’ competitiveness, ADB’s Mr. Ramachandran said.
“The Philippines still has some ways to go in terms of infrastructure provision, access, delivery and quality,” he said.
Citing a 2019 report, he said the Philippines ranked 96th out of 141 countries in terms of infrastructure competitiveness. The country lags in quality of road infrastructure and efficiency of rail networks.
Meanwhile, World Bank’s Mr. Diop said that climate change will impact the Philippines’ economic output “quite significantly.”
“The range of the outcomes is wide because of the uncertainty, but we do know that without adaptation measures and intervention measures, climate change would actually impact the process of generating possibilities, growth in the Philippines,” he added.
Meanwhile, International Monetary Fund (IMF) Representative to the Philippines Ragnar Gudmundsson said domestic demand can be bolstered if inflationary pressures subside.
He said decisive monetary tightening by the Bangko Sentral ng Pilipinas (BSP), a lower-than-expected minimum wage hike for Metro Manila earlier in July, and nonmonetary measures helped mitigate some of the recent inflationary pressures.
The BSP has raised borrowing costs by 450 basis points from May 2022 to October 2023, bringing the key rate to a 16-year high of 6.5%.
“Inflation is projected to gradually approach the BSP’s (2-4%) target in early 2024, even though frequent supply shocks cloud the disinflation trajectory,” he said.
The IMF expects inflation to rise to about 6% this year before declining to 3.5% in 2024.
It also sees Philippine GDP growth to hit 5.3% in 2023, before accelerating to 6% in 2024.
Jon Canto, managing partner of McKinsey & Company’s Philippine office, said the real estate sector has rebounded since the pandemic but slower than overall GDP growth.
“Philippine real estate has shown resiliency in the past few years. Growth is expected to return to pre-pandemic levels in 2024 driven by sustained demand across sector,” he said in a presentation at the BusinessWorld Forecast 2024 economic forum.
Megaworld Corp. Executive Vice-President for Sales and Marketing Noli D. Hernandez said the Philippine real estate sector has been doing very well despite rising inflation.
“In Megaworld, for example, we have seen a sustained and substantial growth in our residential segment. This is mainly because of the fast completion of projects, which was caused by an accelerated pace of construction activities on all fronts,” he said.
Federal Land President William Thomas F. Mirasol said he is optimistic the positive economic momentum will carry through 2024.
“The challenge now is how can Philippine real estate be an engine for growth for everyone. Our shared vision of all of us here can be made more fruitful, how all together we can build better and create a dynamic industry for every Filipino to benefit from,” he added.
Meanwhile, BusinessWorld Publishing Corp. Chief Executive Officer Miguel G. Belmonte said there is a need to build resilient supply chains that are “agile, flexible, and capable of adapting to changing circumstances.”
“We must always steel ourselves against disruption and be able to adapt and innovate when the situation calls for it. Embracing agility will enable us to weather storms, seize emerging trends, and thrive in turbulent times,” he added.
Mr. Belmonte also emphasized the importance of harnessing data and technology to plan ahead.
“Embracing data-driven decision making is no longer a luxury. It is a necessity. Even though we must look inward to improve our operations, we cannot forget to look onward. Globalization has connected businesses across borders like never before, especially with the impetus rise of the global digital economy,” he said. — By Keisha B. Ta-asan, Reporter