THE PHILIPPINE ECONOMY is unlikely to reach the government’s 6-7% growth target this year, although it is still expected to be the fastest-growing economy in Southeast Asia, Maybank Investment Banking Group (Maybank) said.
In a report dated Oct. 27, Maybank said it sees Philippine gross domestic product (GDP) expanding by 5.2% this year, well below the government’s goal.
Maybank’s 5.2% growth forecast for the Philippines is the fastest in the Association of Southeast Asian Nations (ASEAN) region this year, ahead of Indonesia (5%), Vietnam (4.8%), Malaysia (4%), Thailand (2.9%), and Singapore (0.8%).
It is also above the ASEAN-6 GDP average of 4%, as well as the 4.5% forecast for ASEAN-5, which excludes Singapore.
In the first half, Philippine GDP growth averaged 5.3%. In order to reach the lower end of the government’s target, the economy would need to grow by 6.6% in the second half.
The Philippine Statistics Authority (PSA) is set to release third-quarter GDP data on Thursday (Nov. 9).
For 2024, Maybank projects Philippine GDP to expand by 6.5%, which is the lower end of the government’s 6.5-8% target.
This would still make it the fastest-growing economy in the region for next year, ahead of Vietnam (6%), Indonesia (5.2%), Malaysia (4.4%), Thailand (3.6%) and Singapore (2.2%).
Meanwhile, Maybank said that its outlook for trade in the region will also be “brighter” for next year amid signs of recovery.
“Recent data suggest that green shoots are sprouting, brightening the outlook for trade-sensitive ASEAN economies going into 2024,” it said.
Growth drivers include the strong US economy and the normalization in global consumer spending.
“Replacement tech cycle; falling US inventories; and bottoming out of commodity and chip prices will help drive ASEAN export growth going into 2024,” it added.
Maybank said uneven global growth is one of the risks that could derail trade recovery next year, noting the weak activity in the European Union and subdued demand in China.
Maybank noted Singapore, Vietnam, and Malaysia are more exposed to a trade slowdown.
“Exports are a meaningful driver in Thailand as well, but less so in Indonesia and the Philippines, which have larger domestic markets,” it added.
Other risks to the trade outlook include elevated interest rates in the US, tensions between the US and China, and spillovers from the Israel-Hamas war.
“Risks from China’s real estate sector could yet flare up and sour regional financial market sentiment. We cannot rule out the risk of a shallow US recession in 2024, even as our base case has shifted to a US soft landing,” it added.
On the other hand, Maybank said that ASEAN economies are in “good position” to overcome these shocks due to reduced external debt and strong labor markets.
“Inflation has also receded to more comfortable levels across ASEAN (except the Philippines). An enviable pipeline of manufacturing investments in recent years will help deepen ASEAN’s manufacturing capabilities and increase the supply responsiveness to a global trade recovery,” it added. — Luisa Maria Jacinta C. Jocson