FACTORS such as inflation, interest rates and external demand will continue to weigh on economic growth, analysts said, which is expected to again fall below target this year.
"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," Capital Economics analyst Shivaan Tandon said.
Gross domestic product (GDP) growth was 5.6 percent last year, markedly lower than 2022's 7.6 percent and missing the 6.0- to 7.0-percent target as investments, household consumption and government spending slowed.
While Tandon raised his GDP forecast for 2024 to 5.5 percent from 5.0 percent, it is lower than last year's result and the government's 6.5- to 7.5-percent goal.
In particular, he noted that credit growth had slowed in an indication that domestic demand would likely moderate.
"Slower growth in remittances [which account for about 10 percent of GDP], amid weaker growth abroad, is set to weigh on consumption as well," he added.
"Furthermore, it is worth noting that despite the recent pickup the level of fixed investment remains about 8 percent below its pre-pandemic level."
Maybank Investment Banking Group analyst Zamros Dzulkafli, meanwhile, said the challenges from inflation and other factors would limit a rebound this year to 6.0 percent — a downward revision from 6.5 percent previously.
Private consumption growth will likely be limited, and the Bangko Sentral ng Pilipinas (BSP) is expected to keep its policy rate unchanged in the first six months of the year to keep inflation under control.
The BSP's benchmark rate currently stands at 6.5 percent, the highest since 2007, 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 chief has said that while GDP growth may have missed the target, it remained strong enough to absorb another rate hike if such was needed.
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