Despite high inflationary pressures that are seen to carry over from 2023, the Philippines is still forecasted to grow its economy in 2024. This is a result of a push that will come from consumer spending, government spending, and investment spending that started to pick up in the fourth quarter of 2023.

At the recent Market Movers briefing in Manila, Metrobank’s chief economist and Head of Research and Business Analytics Marc Bautista says that the country has a positive economic outlook where he expects a 6% growth in the Philippines’ gross domestic product (GDP) in 2024.

“Revenge” government and consumer spending

On consumer spending, Bautista said that despite high inflation in 2023, there was still a pickup in consumer spending in late 2023. This despite base effects from the high “revenge spending” in 2022 where consumers were spending more to make up for lost time and experiences during the lockdowns.

“People were expecting that this would continue to come down, but it rebounded in the 4th quarter, which is hardly surprising,” Bautista said.

Meanwhile, government spending also rebounded in the third quarter of 2023 as the government realized the need to push spending on many of its infrastructure projects that were delayed by different factors.

“They did a lot of catch-up spending, which very likely front-loaded whatever spending they had for 2nd half of the year into the 3rd quarter, and then maybe just had leftover spending for the 4th quarter,” Bautista said.

He stressed that government spending would continue through 2024. “We expect for this year, government spending will continue. The new finance secretary has indicated that he will continue with the infrastructure spending and all of the development agenda of the government. Couple that with consumer spending, that tells you that we’re still going to get that growth in 2024,” he said.

Surprising investment spending

The big surprise that contributed to higher GDP, at least in the last quarter of 2023 and which may also continue in 2024, is investment spending.

Bautista noted that economic indicators suggested a potential decline in investment spending in the 4th quarter of 2023, with a recovery anticipated in 2024.

Instead, perhaps because of an increase in government spending in Q3 2023, this may have prompted the private sector to increase its investment spending as well in Q4 2023. Expected rate cuts in 2024 may further support investment spending especially in the latter part of the year, where rate cuts are expected to happen. These developments align with the PH’s macroeconomic targets of fostering economic growth and stability.

Import growth and export concerns

The country’s export sector saw some contraction towards yearend 2023 due to weak global demand, which Bautista’s economic outlook said may continue in 2024. However, the Philippines’ growing imports suggest a potential increase in business activity, which is what could drive the Philippines’ economic growth thanks to increased consumer, government, and investor spending.”

“We’re a net importer and we’ve been a net importer really in terms of our position in the global economy. That’s hardly surprising. Because when we’re growing, we need to import the stuff that we need to grow,” Bautista said.

Going back to exports, Bautista said that the contraction is more indicative of the real weakness in the global economy rather than the domestic economy, especially considering the Philippines’ positive economic outlook for 2024.

External concerns, such as the continued effects of the El Niño phenomenon and the shipping disruptions in the Red Sea because of Houthi attacks in the region, have impacted the global supply chain and logistics, which can hamper growth in all economies that have import and export requirements.

Will the Philippine economy be better in 2024?

“The Philippines is a very good place to be. Inflation will be coming down, but it will remain elevated. But since it’s coming down, it gives more room for the Bangko Sentral ng Pilipinas to cut rates. That will give you more incentives for investment spending to start picking up, especially in the second half of this year. Therefore, you’re going to have all that growth,” Bautista said.

ALEXANDER VILLAFANIA is a writer for Metrobank’s Wealth Insights. For almost 20 years, he authored stories on science, technology, and education as a journalist for several local news organizations. He has since transitioned to writing more about financial literacy, believing that helping people develop a healthy relationship with money is key to enabling positive socio-economic and environmental change.