THE Philippines could grow by 6.0 percent this year on the back of robust spending, improved labor market conditions and a continued tourism recovery, Standard Chartered Bank said.
While lower than the 6.5 to 7.5 percent targeted by the government, it is "still pretty decent and probably among the fastest growing in the Asean region," Standard Chartered Bank Asia economist and FX Analyst Jonathan Koh said.
The economy grew by 5.6 percent last year, slowing from 2022's 7.6 percent and missing the government's 6.0- to 7.0-percent target.
Tailwinds such lower unemployment would help accelerate growth this year, Koh said.
"[I]f you look at the employment growth on a year-on-year basis, that appears to be starting to pick up a little bit," he added.
Unemployment fell to 4.3 percent last year from 5.4 percent in 2022. In December alone, the rate slowed to 3.1 percent.
Viewed from the employment side, 50.52 million Filipinos had jobs in December, compared to November's 49.64 million and the year-earlier 49 million.
"The quality of employment is actually strong. Better employment is going to be more supportive of consumer spending this year," Koh said.
He added that the continued tourism recovery should probably help growth in the Philippines as well.
"The recovery in inbound tourism has been recovering a lot faster than the recovery in outbound tourism. More people have been coming in," Koh said.
High interest rates, however, are weighing on growth and Koh noted that the Bangko Sentral ng Pilipinas' 450 basis points (bps) of rate hikes was the highest in the region.
"Tight monetary conditions are probably going to be a headwind for investments, at least for the first half this year," he said.
With inflation on a downtrend, Koh said the BSP could start cutting rates as early as June, starting with 50-basis point and two 25-bps cuts in succeeding meetings.
Lower rates should attract investors and allow the country to benefit from the opening up of several sectors via amendments to the Public Services Act.
"We haven't really seen the positive effects of that (the revised law) yet because interest rates are high. And once interest rates start to come down, probably we see some of those positive effects coming in as well," Koh said.
The BSP could start easing even before inflation falls firmly within target, he also said, but added that the current hawkishness remained appropriate given upside risks to prices.
"[F]or them to drop the hawkish rhetoric completely, I think it is a bit too early. They probably need to wait for more data, for a few more months, which is why we expect them to move in June and not anytime soon," Koh said.
"Probably they can pivot, maybe it's going to be an early second quarter, in terms of changing the tone a little bit more but cuts will come in June."
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