WHILE the country's economic growth remained well above trend, analysts expect that this momentum is unlikely to last due to challenges posed by high inflation and interest rates, along with a sluggish recovery in external demand.

"With the drag from higher interest rates yet to filter through the economy in its entirety and global demand likely to weaken, we continue to expect below trend growth in the Philippines over the coming quarters," said Emerging Asia economist Shivaan Tandon.

While Tandon revised its 2024 growth projections upward — to 5.5 percent from 5.0 percent due to the stronger-than-expected fourth-quarter data — it is still below the government's 6.5- to 8.5-percent target.

Gross domestic product (GDP) growth came in at 5.6 percent last year, slowing from 2022's 7.6 percent and missing the government's 6.0- to 7.0-percent target.

Tandon mentioned that this resilience is temporary despite strong domestic demand against increased borrowing costs. He stressed that the economy's credit growth has slowed down, indicating a potential decrease in domestic demand growth in the upcoming quarters.

"Slower growth in remittances, which account for about 10 percent of GDP, amid weaker growth abroad, is set to weigh on consumption as well," said Tandon.

"Furthermore, it is worth noting that despite the recent pickup, the level of fixed investment remains about 8 percent below its pre-pandemic level," he added.

Meanwhile, Maybank Investment Banking Group analyst Zamros Dzulkafli anticipates challenges for the economy due to high inflation, interest rates and a sluggish external demand recovery.

He then adjusted downward its 2024 growth forecast to 6.0 percent from the previous forecast of 6.5 percent.

"The slower growth during the quarter is attributed to a contraction in both government spending and exports of goods and services," Dzulkafli said.

Philippine Statistics Authority data showed that government expenditures and exports fell by 1.8 percent and 2.6 percent, respectively.

Dzulkafli, meanwhile, expects private consumption to grow by 5.5 percent next year.

He anticipates the Bangko Sentral ng Pilipinas (BSP) to keep the policy interest rate unchanged in the first half of 2024 to ensure stable inflation expectations.

The BSP's benchmark rate currently stands at 6.5 percent following 450 basis points of rate hikes beginning May 2022 in response to surging inflation.

Inflation hit a 14-year high of 8.7 percent in January but returned to target in December at 3.9 percent. The full-year average, however, still breached the BSP's 2.0- to 4.0-percent target at 6.0 percent.

The rate could spike later this year due to the impact of the El Niño weather pattern, and the BSP has said that interest rates would be kept unchanged until inflation settles firmly within target.