LOWER borrowing costs and strong economic growth will continue to drive vehicle demand in the Philippines through 2025, a Fitch Solutions company said, as households take advantage of cheaper financing. BMI Country Risk & Industry Research raised its 2024 vehicle sales forecast for the country to 8.5 percent, or 466,500 units, from 1.6 percent previously. "This revision is underpinned by robust economic growth, which is lifting incomes and employment," it said. "This is a significant adjustment from our previous forecast, as demand in 2024 has so far exceeded our expectations." Data from the Asean Automotive Federation showed that vehicle sales in the first seven months of this year increased by 10.9 percent, totaling 265,610 units, from 239,501 units a year earlier. The increase was attributed to the country's strong economic growth that has fueled this higher-than-expected demand. Second-quarter growth came in higher than expected at 6.3 percent due to robust fiscal spending and private investments. The commercial vehicle segment, BMI said, will keep driving growth in the Philippine auto market. Sales for this segment are expected to grow by 7 percent to 343,000 units. This will be fueled by strong government spending, especially in construction that grew by 16 percent in the second quarter and rising demand from the mining and quarrying sector as investments increase. Strong demand for passenger cars in the near term is also expected due to a robust labor market and economic growth. BMI noted that unemployment was at its lowest in nearly 20 years and incomes were also rising, making cars more affordable. This has made Filipino households spend more on nonessential goods. According to the Asean Automotive Federation, passenger car sales were up 17.3 percent as of end-July, reaching 70,798 units. BMI has raised its 2024 passenger car sales growth forecast to 13.0 percent, up from 1.5 percent previously. Sales, however, are still expected to remain below the 2016 peak of 133,188 units. "For 2025, we anticipate that reduced borrowing costs will continue to support the growth of the passenger car segment, as households respond favorably to lower financing rates," it said. WITH A REPORT FROM PNA
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