The Philippine economy could expand by over 6% this year and next, driven by government spending, robust private consumption, and strong external demand, according to the ASEAN+3 Macroeconomic Research Office (AMRO).

However, the outlook faces potential challenges from inflation risks and a possible slowdown in key trading partners such as the US and China.

It went on to say that although the country’s fiscal-monetary policy mix is “appropriate,” it can be amended “to support economic growth while rebuilding policy buffers.”

“The Philippine economy is expected to grow by 6.1% in 2024 and 6.3% in 2025, driven by higher government spending, as well as an upturn in external demand, and strengthening domestic demand,” AMRO Principal Economist Runchana Pongsaparn said in a statement.

“Private consumption is anticipated to grow faster for the rest of the year, supported by strong labour market conditions, lower inflation, and robust overseas remittances. With the start of the monetary policy easing cycle, we expect private investment sentiments to improve,” Ms. Pongsaparn added.

If achieved, AMRO's 2024 forecast would align with the government's target range of 6-7%, while the 2025 projection would fall short of the 6.5-7.5% goal for that year, Business World reports.

The Philippine economy grew by 6.3% in Q2, bringing growth for the first half of the year to 6%. To reach the lower end of the government's target for this year, the economy needs to expand by at least 6% in the second half.

Furthermore, government spending increased by 10.7% in the second quarter, accelerating from 1.7% in the previous quarter and reversing the 7.1% decline seen a year earlier. 

This marked the fastest growth since the second quarter of 2022. 

Moreover, household consumption, which makes up over two-thirds of the economy, grew at a slower pace, rising 4.6% in the second quarter compared to 5.5% in the same period last year.

“In the near term, the growth prospects of the Philippines could be subject to several risks. Higher inflation, especially from food prices, could dampen consumption,” AMRO said.

The think tank forecasts inflation to average 3.3% in 2024 and 3.1% in 2025, both comfortably within the Bangko Sentral ng Pilipinas' (BSP) annual target range of 2-4%.

“While upside risks such as wage increases and local food supply shocks remain, the slowdown of headline inflation is expected to continue in the second half of 2024 due to lower international prices of fuel and food and tariff cuts on imported rice,” it said.

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