PHL economy ‘won’t be far behind Vietnam’ — Moody’s Analytics

ECONOMIC GROWTH in the Philippines and the The rest of Southeast Asia is expected to continue on an expansionary path through 2025, according to Moody’s Analytics.

“Growth will accelerate in Southeast Asia, supported by trade, investment and consumption, which are generally stimulative Ffinancial policy and, early next year, an easing of monetary policy,” said Steven Cochrane, chief economist for Asia and the Pacific at Moody’s Analytics, in a commentary.

“The Philippines and Indonesia will not be far behind Vietnam, but their economies are not as closely linked to the global economy,” he added.

Moody’s Analytics expects the Philippine gross domestic product (GDP) to grow 5.9% this year, 6% next year and 6.1% in 2026. This would fall short of the government’s growth target of 6-7% for 2024, 6.5-7.5% for 2025, and 6.5-8% for 2026.

The Philippine economy grew 6.3% in the second quarter, faster than the 5.8% in the second quarter Ffirst quarter and 4.3% in the same period a year ago. This was also the fastest growth since 6.4% in the US Ffirst quarter of 2023.

To meet the lower end of the government’s 6-7% target this year, GDP would need to grow by at least 6% in the second half.

Moody’s Analytics said it is optimistic about growth across the Asia Pacific regionFic (APAC) region.

“The outlook for the APAC economy in 2025 is good, even though economic growth in China and India is likely to slow in the coming year,” Mr Cochrane said.

“A slow improvement in global trade, robust capital expenditure and sustained consumer spending will drive economic expansion in the region,” he added.

For the Philippines, Mr Cochrane said there must be an “aggressive push” to boost infrastructure to support growth.

The Marcos government plans to spend 5-6% of GDP on infrastructure annually.

The latest data from the budget department shows that infrastructure spending has increased by 20.6% year-on-year to €611.8 billion in recent years. Ffirst half of the year.

The Philippines “must stick to its plans and implement them well,” Cochrane said.

“Fiscal policy in the Philippines is strongly focused on infrastructure development, but the actual implementation of these policies has been uneven over the past year,” he added.

The government has so far approved 186 flagship infrastructure projects worth P9.6 trillion.

Meanwhile, Moody’s expects Philippine headline inflation to reach 3.5% this year, slightly higher than the Bangko Sentral ng Pilipinas (BSP) forecast of 3.4% for the year.

InFInflation accelerated to 4.4% in July, despite the central bank saying so earlierFInflation is expected to trend downward in the coming months and settle within the target range of 2-4%.

Before 2025, inFInflation is expected to reach 3.2%, also slightly higher than the BSP’s 3.1% forecast.

On the other hand, Mr. Cochrane Flingering risks to the region’s growth prospects, such as weaker consumer confidence in China, geopolitical risks and the upcoming US elections.

“If Donald Trump wins the presidency, it would lead to higher tariffsFfs on goods imported by the US from China and much of the rest of the world,” he said.

However, he noted that since the Philippines is a less export-sensitive economy, it is “much less at risk in the Trump election scenario.”

CREDIT RATING
Meanwhile, Moody’s Ratings fell last weekFaffirmed the Philippine investment grade rating of “Baa2” with a “stable” outlook.

“The reviews affiration reFtakes into account a range of factors. The government’s implementation of a series of reforms in recent years to liberalize the economy to attract foreign investment will support the Philippines’ high medium-term growth potential,” the country said in a statement on its website.

The credit rating agency said it was affThe excitement was also due to the expectation that “FIscal consolidation will resume, with debt levels remaining above pre-pandemic levels but comparable to those of peer countries over the medium term.”

The government aims to bring the debt ratio to 60.6% of GDPFicit-GDP ratio to 5.6% by the end of the year.

However, Moody’s also mentioned risks such as a weakening of the debt burdenFfording due to, among other things, high interest rates, exposure to climate risks and geopolitical uncertainties.

BSP Governor Eli M. Remolona, ​​Jr. welcomed Moody’s confirmation of the Philippines’ creditworthiness. “We are taking a measured approach to ensuring price stability conducive to sustainable economic growth,” he said.

Treasury Secretary Ralph G. Recto said the investment grade rating allows the government to gain greater certaintyFfordable Ffinancing.

“These will create more quality jobs, increase incomes and reduce poverty in the country,” Mr Recto said in a statement.

The government aims to achieve an “A” rating status by the end of the administration.

Earlier this month, Japan-based Rating and Investment Information, Inc. the Philippines’ investment grade rating raised to “A-.” — Luisa Maria Jacinta C. Jocson