Philippine economy growth can accelerate to 6 to 6.25 percent next year on the back of better interest rates and lesser economic uncertainties.
“Better interest rates, higher consumer spending and government spending are expected to drive domestic growth,” Sun Life Investment Management and Trust Corporation (SLIMTC) president Michael Gerard Enriquez said.
He said they forecast economic growth, as measured by gross domestic product (GDP), hitting 5.6 percent this year, lower than the government’s 6 to 7 percent assumption.
The country’s GDP grew 5.2 percent in the third quarter of 2024, bringing the average for the first three quarters to 5.8 percent.
However, he said that with interest rates both here and in the US expected to decline further, this will bolster spending.
Enriquez forecasts the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve to cut their respective key rates by 100 basis points next year, “but Fed is expected to be more aggressive.”
To date, the BSP’s target reverse repurchase rate (RRP) is at 6 percent.
BSP’s policy-making Monetary Board (MB) has reduced the central bank’s key rates by a total of 50 basis points so far this year, and BSP Governor Eli Remolona is open to further reducing the target RRP in the last quarter of the year.
Meanwhile, the expected decline in interest rates is seen to benefit SLIMTC’s business moving forward.
“As rates go down, investors will look for riskier assets,” Enriquez said, referring to stocks of listed firms, among others, which SLIMTC places funds into.
Enriquez said their assets under management (AUM) has grown significantly since they started operations in 2021.
He said the business is affected by higher rates and uncertainties due in part to the US elections this year.
“But inflation is expected to go down and uncertainties in the US have been lessened. We can see better output in 2025,” he added.
The rate of price increases accelerated to 2.3 percent last October from month-ago’s 1.9 percent due to faster upticks in the prices of food and non-alcoholic beverages.
The latest figure is within the central bank’s 2 to 2.8 percent forecast for the month.
Despite the acceleration, the average inflation in the first 10 months of the year stood at 3.3 percent, within the government’s 2 to 4 percent target band.
