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Private sector economists expect inflation to remain within the central bank’s 2-4% target from this year to 2026, the Bangko Sentral ng Pilipinas (BSP) said.

The BSP’s latest survey of external forecasters in its Monetary Policy Report showed that analysts’ mean inflation forecast for this year stood at 3.1%, lower than the central bank’s 3.3% baseline projection.

The survey showed an 82.6% likelihood that inflation will settle within target this year and an 83.5% probability for 2026.

“Inflation expectations continue to be well-anchored. Risks are broadly balanced, with headline inflation expected to stay low and manageable over the medium term.”

For 2026, economists expect inflation to average 3.2%, also below the BSP’s 3.5% forecast.

Headline inflation averaged 3.2% in 2024, well within the target band. January inflation data will be released on Feb. 5.

The survey showed the within-target inflation outlook is mainly driven by easing rice and oil prices.

“Downside risks to the inflation outlook are seen to emanate largely from lower rice prices, amid the implementation of Executive Order (EO) No. 62 and lower oil prices,” the BSP said,

President Ferdinand R. Marcos, Jr. last June signed EO 62, which slashed rice import tariffs to 15% from 35% until 2028, citing the need to curb rice prices.

Rice inflation has slowed to 0.8% in December from 5.1% in November and 19.6% a year prior. Rice is typically the biggest contributor to overall inflation.

Global crude oil prices are seen to ease further, the BSP said.

“Futures prices have declined due to market expectations of higher US oil production and expectations of weaker global demand as well as the likelihood of global oversupply.”

“This in turn led to a delay in the anticipated increase in oil production by the Organization of the Petroleum Exporting Countries and other partner countries (OPEC+).”

However, the central bank warned that inflation could breach the 2-4% band if Dubai crude oil prices average above $90 per barrel from this year to 2026.

The Development Budget Coordination Committee expects Dubai crude oil to range from $60 to $80 per barrel from 2025 to 2026.

“These oil price scenarios consider only direct effects and do not incorporate potential second-round effects on transport fares, food prices, and wage increases.”

The surveyed analysts also flagged upside risks to the inflation outlook such as supply disruptions due to geopolitical tensions and adverse weather conditions.

“The potential spike in electricity rates, higher-than-expected wage adjustments, and protectionist US trade policies were also identified as upside risks,” it added.

The BSP also noted the possibility of rising electricity rates in the coming months.

“In July 2023, the Supreme Court nullified the previous cap on Wholesale Electricity Spot Market (WESM) prices for November 2013 and December 2013. Electricity rates could rise due to the potential increase in generation charges being passed on to consumers.”

The central bank earlier warned that the balance of risks to the inflation outlook remain tilted to the upside for this year and the next.

The BSP expects inflation to settle at the midpoint of the 2-4% target until the first half of 2025, before accelerating to the upper end of the target from the second half of 2025 to the first half of 2026.

Inflation will ease closer to the midpoint of the target by the second half of 2026, driven by declining global commodity prices, it added.

Further easing

Meanwhile, analysts surveyed by the BSP also expect further monetary policy easing for this year.

“For 2025, the general view is that the BSP will ease its monetary policy stance by a range of 50-100 basis points (bps). Meanwhile, analysts have mixed views on the target reverse repurchase (RRP) rate for 2026,” the BSP said.

Last year, the Monetary Board cut rates by a total of 75 bps, bringing the key rate to 5.75% by end-2024.

“On balance, there is scope for measured monetary policy easing given the within target inflation, manageable underlying price pressures and well-anchored inflation expectations. However, upside risks to inflation warrant close monitoring,” the BSP said.

“A further cut in the policy rate will help reinforce the impact of the prior monetary easing on market interest rates, lending activity, and aggregate demand.”

BSP Governor Eli M. Remolona, Jr. has said there is room to ease further as the current policy rate is still in “restrictive territory.” However, the central bank is likely to deliver further rate reductions in “baby steps.”

‘Below potential’

Meanwhile, the BSP expects the Philippine economy to “grow below potential” over the near term due to subdued demand. The government is targeting 6-8% for 2025 to 2026.

“The outlook for domestic growth indicates a more subdued pace of economic activity up to 2026,” it said.

The BSP expected economic growth in 2024 to settle slightly below the government’s 6-6.5% target, after a weaker-than-expected third-quarter gross domestic product (GDP) print.

Fourth-quarter and full-year GDP data will be released today (Jan. 30).

“However, GDP growth is seen to modestly improve and settle close to the low end of the targets for 2025 and 2026,” the BSP said.

“The decline in global oil prices, the easing of BSP’s monetary policy, and the reduction in the reserve requirement ratio are seen to support domestic economic activity.”

Domestic demand is also seen to “remain firm but subdued.” — Luisa Maria Jacinta C. Jocson

A recovery in household consumption could drive Philippine gross domestic product (GDP) growth to the 6% range this year, HSBC Global Research said.

“We think household consumption in the Philippines should return, bit by bit, to its regular levels, bringing overall gross domestic product growth back to the range of 6% or more,” HSBC economist for ASEAN Aris D. Dacanay said in a report.

The Philippines’ GDP expanded by 5.2% in the third quarter, its weakest growth in five quarters. This brought the nine-month growth average to 5.8%.

The economy likely grew by 5.8% in the fourth quarter and 5.7% for the full-year 2024, according to a BusinessWorld poll of 18 economists last week. Fourth-quarter and full-year GDP data will be released today (Jan. 30).

The government is targeting 6-6.5% growth for 2024 and 6-8% for 2025 to 2026.

“Consumption should also be boosted over the near term with the recent depreciation in the Philippine peso against the US dollar boosting the purchasing power of every US dollar remitted.”

HSBC also cited a stronger recovery in non-durable consumer goods.

“Non-durable spending may be improving fast, but spending on big-ticket items, such as cars and real estate, will need more time to return to normal.”

“These goods are large expenditures by nature, potentially requiring households to acquire credit. To optimize one’s borrowing costs, households may be waiting for the central bank’s easing cycle to end before eventually deciding whether to borrow money or not.”

Mr. Dacanay said household consumption is unlikely to be affected by the Trump administration’s aggressive tariff policy.

“Remittances, demographics, and services exports — three sectors of the economy that drive consumption — are subject to minimal tariff risks, at best. So, to monitor the Philippine economy in 2025, watching household consumption will be key,” he said.

“The economy does have some layer of insulation; household consumption remains the country’s main growth driver, and no other economy can put a tariff on consumption.”

Markets are pricing in the impact of US President Donald J. Trump’s aggressive tariff proposals. He has pledged to impose tariffs of up to 60% on China, 25% on Canada and Mexico as well as a 10% universal tariff.

Mr. Trump also said he planned to slap tariffs on imported computer chips, pharmaceuticals and steel as part of efforts to encourage manufacturers to make these products in the US.

“With all the headlines on trade and tariffs, there is a sense of relief that the Philippines is the least affected in ASEAN (Association of Southeast Asian Nations),” Mr. Dacanay added.

HSBC noted that household consumption has slowed amid elevated inflation and interest rates, which dampened purchasing power.

Private consumption grew by 5.2% in the third quarter of 2024, improving from 4.7% in the second quarter.

“But all this is already behind us. Inflation is back to within the central bank’s 2-4% target band, while monetary policy is amidst its gradual easing cycle,” Mr. Dacanay said.

Headline inflation averaged 3.2% in 2024. The BSP also expects inflation to remain within the 2-4% target band from this year to the next, as its baseline projections are at 3.3% and 3.5% for 2025 and 2026, respectively.

The central bank began its rate-cutting cycle in August last year, delivering a total of 75 basis points (bps) worth of cuts as of end-2024. This brought the key rate to 5.75%.

The BSP has signaled further rate cuts this year.

HSBC expects the central bank to bring down the benchmark rate to 5% by the third quarter of 2025. — Luisa Maria Jacinta C. Jocson

Philippine economic growth was expected to have quickened in the fourth quarter of 2024, driven by strong consumer spending during the holiday season, although the full-year print likely fell short of the government target, a BusinessWorld poll showed.

Gross domestic product (GDP) in the October-to-December period likely grew by 5.8% from a year earlier, accelerating from the 5.2% growth in the third quarter, according to the median forecast of a BusinessWorld poll of 18 economists and analysts last week.

This would match the 5.8% expansion in the fourth quarter of 2023.

At the same time, the BusinessWorld poll yielded a median estimate growth of 5.7% for 2024, below the Development Budget Coordination Committee’s revised 6-6.5% GDP growth goal.

If realized, the growth in 2024 would be faster than the 5.5% print in 2023. This would also be the fastest annual economic growth in two years or since the 7.6% recorded in 2022.

The full-year estimate would also be below the forecasts made by the Asian Development Bank (6%), World Bank (5.9%), International Monetary Fund (5.8%) and ASEAN+3 Macroeconomic Office (5.8%).

The Philippine Statistics Authority (PSA) will release the fourth-quarter and full-year 2024 GDP on Thursday, Jan. 30.

“The economy’s primary growth engine, household consumption, likely continued to rebound from its subdued growth in the first half of last year, supported by lower and stable inflation, a robust labor market, and steady remittance inflows,” Chinabank Research said in an e-mail.

It also noted the series of typhoons “disrupted” economic activities in agriculture, construction, and tourism in the final three months of the year.

Six typhoons battered the Philippines between October and November that resulted in economic losses worth more than P22 billion, according to situational reports by the National Disaster Risk Reduction and Management Council. Broken down, the agency estimated P13.7 billion in infrastructure damage, P7.47 billion in agriculture, and P1.16 billion in irrigation systems.

Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said in an e-mail that household consumption likely accelerated due to the holiday season and higher remittance flows.

“On the production side, we observed resilient services activity — underpinned by retail trade, accommodation and food services, and finance — and positive manufacturing growth albeit dragged by sluggish agriculture,” Mr. Taningco said.

Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, in an e-mail said increased government spending may have been a factor in driving GDP growth in the fourth quarter.

In the 11 months to November, government spending rose by 12.96% to P5.28 trillion, nearly 92% of the revised P5.8-trillion spending program for 2024.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco in an e-mail said he expects only a “modest bounce” in the fourth-quarter GDP growth to 5.4%.

“This should be driven to a large extent by a bounce in government spending growth, where base effects are quite favorable. To be sure, the economy, on the whole — bar exports — appear to have found some semblance of stability at the end of last year, in terms of sequential quarter-on-quarter momentum,” he said via e-mail.

Mr. Chanco noted the main tailwind for private consumption is that “inflation remains broadly under control and the labor market is still in fairly decent shape.”

Consumer prices in the final three months slightly crept up. Inflation in October picked up to 2.3%, then to 2.5% in November before accelerating to a four-month high of 2.9% in December.

Average inflation reached 3.2% in 2024.

Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said inflation data were a “positive surprise” in 2024, saying that it was below forecasts.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said in an e-mail that private construction may have contributed to the drag in fourth-quarter growth.

“Hefty two-digit vacancy rates in residential and office/commercial space segment, while supply/inventory of middle-market condominium units is equivalent to almost three years (34 months), according to local real estate analysts,” Mr. Asuncion said.

He also noted the total ban on Philippine Offshore Gaming Operators “weighed on the other services segment of the services sector and the administrative and support services.”

Sarah Tan, economist at Moody’s Analytics, said “poor” external conditions in the fourth quarter affected electronics exports that weighed on overall export growth.

“Despite the upturn in the global tech cycle, which has signaled strong demand for advanced semiconductors, the Philippines is being left out in the cold,” Ms. Tan said in an e-mail.

Preliminary data from the PSA showed the country’s merchandise trade deficit widened to a two-year high of USD 54.21 billion last year as imports picked up while exports continued to drop.

Electronic products, which accounted for close to 40% of total exports last year, dropped by 6.7% to USD 39.08 billion. Semiconductors, which made up the bulk of electronic products, contracted by 13.5% to USD 29.16 billion.

On the imports side, electronic products inched up by 2.7% to USD 27.37 billion last year, while semiconductors slid by 1.8% to USD 18.5 billion.

Optimism

Meanwhile, many economists and analysts are optimistic on the Philippine economic outlook for this year.

“We expect the Philippine economy to maintain its upward growth trajectory this year on the back of improving consumption and investments due to the outlook for stable, within-target inflation, and lower borrowing costs,” Chinabank Research said.

“A higher government budget this year, along with sustained infrastructure spending, will also support growth,” it added.

Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said he expects GDP to grow by 6.2% this year “on a continued recovery in household consumption and corporates investing in capital outlays at a better clip.”

While Philippine growth missed the target in 2024, Mr. Mapa said this year “could likely be a different story.”

“Growth missed the target as capital formation remains below pre-pandemic levels but 2025 promises to be a better year for the sector thanks to policy easing from the Bangko Sentral ng Pilipinas (BSP). Projected follow-through rate cuts could help support growth further in 2025 and ensure growth finally hits target,” he said.

The BSP began its easing cycle in August last year, delivering a total of 75 bps worth of cuts to bring the benchmark rate to 5.75%. — Kenneth H. Hernandez

Philippine farm output likely contracted in 2024, reflecting the adverse impact of weather-related events such as El Niño and La Niña, analysts said.

Former Agriculture Undersecretary Fermin D. Adriano estimates that the value of agricultural output may have declined by more than 1% in 2024.

If realized, this would be a reversal of the 0.4% growth in the value of agricultural production in 2023 and miss the Department of Agriculture’s (DA) 1-2% growth target for 2024.

“Of course, El Niño and La Niña adversely affected the sector,” Mr. Adriano said in a Viber message.

The El Niño weather event, which began in June 2023, brought below-normal rainfall conditions, dry spells and droughts that affected overall harvest during the year.

The Philippines continued to experience below-normal rainfall conditions in the first half of the year. In the second half, the country experienced a series of storms that brought heavy rains and caused flooding.

“The year 2024 was full of challenges and issues. Overall, the agricultural output will be lower than 2023 due to natural calamities including El Niño and La Niña one after the other,” former Agriculture Secretary William D. Dar said in a text message.

Mr. Dar said the delayed distribution of inputs to farmers, as well as lack of technical assistance from local government units may have also contributed to the decline in agricultural production.

“With the series of typhoons and calamities in the fourth quarter, we can only expect output in the whole of 2024 to be lower than in 2023,” said Federation of Free Farmers National Manager Raul Q. Montemayor in a Viber message, citing El Niño and La Niña as factors that contributed to the drop in farm output.

The Philippine Atmospheric, Geophysical, and Astronomical Services Administration (PAGASA) declared the end of the El Niño in June 2024 but dry spells persisted in some parts of the country.

According to the DA’s final El Niño bulletin, agricultural damage was tallied at PHP 15.3 billion with total volume lost at 330,717 metric tons, spanning 109,481 hectares of farmland.

In the second half, La Niña conditions increased the likelihood of tropical cyclones, low-pressure areas, and the intensification of the southwest monsoon in the Philippines.

La Niña conditions are expected to persist until the end of the first quarter of 2025, according to PAGASA.

Hog production, in particular, saw a decline in production due to these weather disturbances.

“El Niño affected production because warmer temperatures caused pigs to pant and reduced significantly their feed intake causing slower growth and lower weights,”

National Federation of Hog Farmers, Inc. (NatFed) Vice-Chairman Alfred Ng said in a Viber message.

Mr. Ng said heavy rainfall also raised the likelihood of respiratory diseases among hogs, which would have led to higher treatment costs.

“Mortalities may also be an issue especially for poorly managed farms and facilities,” he added.

At the same time, Mr. Adriano said several animal diseases like the African Swine Fever (ASF) and the Highly Pathogenic Avian Influenza  or bird flu, continue to affect the production in livestock and poultry sectors.

In the second half of 2024, the Philippines saw a resurgence in ASF cases which prompted the government to fast-track the roll out of vaccines for limited use.

Only the AVAC ASF Live vaccine from Vietnam has received approval for a limited government-controlled rollout. The Food and Drug Administration (FDA) has issued a Certificate of Product Registration for AVAC, valid for two years and subject to annual review.

The recent outbreaks were blamed on the spread of contaminated water due to heavy rains, the DA said.

Outlook for 2025

Meanwhile, Mr. Montemayor said that farm production may likely rebound in 2025 due to low base effects.

“For 2025, you could say there is nowhere else to go but up given that we will be starting from a low base,” he said.

According to NatFed’s Mr. Ng, the DA and the FDA will soon allow the widespread use of the ASF vaccine which could help the hog industry’s recovery.

“If vaccine is successful for backyard raisers, then ASF virus load will go down and commercial farms with stronger biosecurity systems will also be protected. Then, the industry can bounce back as commercial farmers may be encouraged to come back,” he added.

The DA said earlier that the commercial use of the ASF vaccine could be allowed by February or March of this year.

The department also said that it is seeking to begin large-scale trials of a bird flu vaccine by March.

For Mr. Dar, the government must distribute agricultural inputs in a timely manner to help the sector boost production and income this year.

The Philippine Statistics Authority is set to release fourth-quarter and full-year data on farm output on Jan. 28 (Tuesday).

The agriculture sector contributes about a tenth of the country’s gross domestic product and provides around a quarter of all jobs. – Adrian H. Halili, Reporter

The Philippines’ trade-in-goods deficit widened in 2024, the largest trade gap in over two years as imports picked up while exports continued to decline, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary data from the PSA showed the country’s full-year trade balance — the difference between the values of exports and imports — grew by 3.1% year on year to USD 54.21-billion deficit in 2024 from the USD 52.59-billion gap a year earlier.

The latest figures marked the lowest trade gap since the USD 57.65-billion deficit in 2022.

Merchandise exports in 2024 declined by 0.5% to USD 73.21 billion, below the 4% growth projection set by the Development Budget and Coordination Committee (DBCC) for 2024.

A year earlier, exports fell by 7.5%.

Meanwhile, imports rose by 1% year on year to USD 127.43 billion in 2024, picking up from the 8% contraction in 2023. Imports growth missed the DBCC’s 2% growth target.

In December, the country’s trade-in-goods deficit narrowed to USD 4.14 billion from the USD 4.85 billion deficit in November.

This was the smallest trade gap in nine months or since the USD 3.35 billion deficit in March 2024.

Merchandise exports for the month fell by 2.2% to USD 5.66 billion, slower than the 8.6% contraction in November.

By value, export haul in December was the lowest in six months or since the USD 5.57 billion in June 2024.

Likewise, imports contracted by 1.7% to USD 9.79 billion, slower than the 4.1% drop a month earlier.

Import value was the lowest in nine months or since USD 9.57 billion in March 2024.

“For the last few years, both exports and imports were quite weak and hardly drivers of economic growth,” said Diwa C. Guinigundo, country analyst at GlobalSource Partners.

Mr. Guinigundo added that on a net basis, external trade contributes minimal impact on the economy.

“Weak exports are overshadowed by higher imports even as they have been quite sluggish recently, [while] modest imports are also indicative of weak manufacturing and business activities,”Mr. Guinigundo said in a Viber message.

Additionally, he noted that over the last two years, the Philippine economy saw some slowdown, falling behind the lower end of the growth targets.

In 2023, the Philippine economy grew by 5.5%, significantly slower than the 7.6% expansion in 2022.

This was the weakest growth in three years since the 9.5% slump in 2020.

The PSA will be reporting the fourth quarter and full-year gross domestic product on Jan. 30, Thursday.

Manufactured goods, accounting for more than three-fourths of exports, went down by 2.6% to USD 58.34 billion last year.

Electronic products, making up most manufactured goods and more than half of all exports, slumped by 6.7% to USD 39.08 billion. Semiconductors also fell by 13.5% to USD 29.16 billion.

The United States remained the top destination for Philippine-made goods in 2024, with exports valued at USD 12.12 billion or 16.6% of total export sales.

It was followed by Japan with USD 10.33 billion (14.1% share), Hong Kong with USD 9.6 billion (13.1%), China with USD 9.44 billion (12.9%), and South Korea with USD 3.57 billion (4.9%).

Imports of capital goods inched down by 0.1% to USD 35.7 billion.

On the other hand, imports of raw materials and intermediate goods rose by 2% to USD 46.35 billion.

Imports of consumer goods also climbed by 5.6% to USD 25.81 billion, while imports of mineral fuels, lubricants and related materials declined by 5.2% to USD 19.06 billion.

By commodity group, electronic products had the highest import value at USD 27.37 billion in 2024, up 2.7% from USD 26.64 billion a year ago.

China was the biggest source of imports for the year with USD 32.81 billion worth of goods, accounting for 25.8% of the total import bill.

It was followed by Indonesia with USD 10.55 billion (8.3% share), Japan with USD 10.07 billion (7.9%), South Korea with USD 9.63 billion (7.6%) and United States with USD 8.17 billion (6.4%).

Jesus L. Arranza, chairman of Federation of Philippine Industries, said in a phone call that illicit trade and imports for consumer goods like rice and sugar contributed to the widening of the gap for the year.

He added that the increase in smuggling in the country has led to the decline in domestic manufacturing.

“The president would like to stabilize the price of rice, the price of sugar… There is our desire, also, to bring down prices for the consumers. Because the consumers have already made noise,” he said in a mix of Tagalog and English.

Mr. Arranza also said that the narrowing of the gap in December was due to goods already being delivered during the October-November period, anticipating the end of the season.

Mr. Guinigundo said that while it is good that US tariff increases will not be applied on Philippine exports, they could affect Philippine exports to China, which participates in the Southeast Asian country’s semiconductor market.

“This would require a rethink of Philippine exporters on their market focus,” Mr. Guinigundo said. — Pierce Oel A. Montalvo