The Philippine economy is projected to grow at 6% in the fourth quarter of 2024, up from 5.2% in the third quarter, driven by strong domestic demand, easing inflation, and lower policy rates, according to a Citi economist.
“We expect growth to pick up to 6% in Q4 (fourth quarter), supported by stronger domestic demand that is likely to be bolstered by lower policy rate and inflation, as well as the recent RRR (reserve requirement ratio) cut that would continue to support credit expansion,” said Nalin Chutchotitham, Citi’s economist for the Philippines and Thailand, in a report released on Monday.
Chutchotitham also pointed to the recent passage of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, which is expected to help sustain private sector and foreign direct investment growth. The new law reduces the corporate income tax rate from 25% to 20%, offers additional deductions for power expenses, and streamlines the value-added tax (VAT) refund process.
The Bangko Sentral ng Pilipinas (BSP) has already cut its policy rates by 50 basis points this year and lowered the RRR by 250 basis points. Chutchotitham said these measures would inject more liquidity into the banking system, supporting continued credit expansion.
Inflation, meanwhile, remained well within the government’s target range of 2% to 4%, slowing to 2.3% in October.
“Household consumption is expected to continue improving, supported by a lower interest rate and improved consumer sentiment as inflation continues to stabilize,” said Chutchotitham.
The government’s infrastructure projects are also expected to ramp up in the fourth quarter of 2024 and into the first quarter of 2025.
For the full year, the Philippine economy is projected to grow by 5.8%, with growth expected to pick up further to 6.0% in 2025.