WB trims PH growth forecast

The World Bank (WB) on Tuesday trimmed down its 2024 growth outlook on the Philippines to a level that’s short of the government’s target, with powerful typhoons emerging as a major threat to the economy and poverty reduction.

In its latest Philippines Economic Update, the WB said gross domestic product (GDP) this year would grow by 5.9 percent, lower than the previous forecast of 6 percent.

If the watered-down projection of the Washington-based institution comes to pass, GDP expansion in 2024 would fail to hit the 6 to 6.5 percent target range of the Marcos administration for this year.

WB said the downgrade was triggered by the below-market consensus growth of 5.2 percent in the three months ending in September, which was the weakest reading in more than a year following the onslaught of storms that disrupted government spending and damaged farm output.

Overall, WB said climate disasters were a big threat not just to growth but also to poverty reduction. Using the $3.65 per day benchmark, latest WB projections showed that poverty incidence would unlikely drop to single-digit levels by 2026, although a downward trend would be sustained.

”Household income vulnerability, particularly high exposure and vulnerability to climate disasters, may undermine the potential for continued poverty reduction,” the bank said.

”These weather-related shocks have in the past damaged homes, infrastructure and caused disruption to businesses and livelihood,” it added.

As it is, the Marcos administration already adjusted its macroeconomic view to account for the disruptions caused by the adverse weather conditions.

Earlier this month, economic managers narrowed their 2024 GDP growth target range to the current level of 6 to 6.5 percent, as they also cited the weak performance in the third quarter.

But the WB said the short-term effects of the recent typhoons and prolonged droughts were unlikely to dampen the country’s medium-term prospects “due to improving conditions that will support domestic demand and improve the country’s resilience.”

The bank penciled in a 6.1-percent GDP growth for 2025, and a 6-percent expansion for 2026. If realized, economic performance would settle within the government’s revised growth target of 6 to 8 percent for next year until the end of President Marcos’ term in 2028.

“Growth is projected to improve over the forecast period, buoyed by improving conditions for private domestic demand due to lower inflation, easing financial conditions, and recent reforms that will liberalize investment activity,” the WB said.

Source: Inquirer

Most Filipinos expect inflation to continue to rise

Most Fiipinos see inflation rising over the next year and do not expect the pace of price increases to normalize anytime soon, according to a survey by Ipsos.

In its latest Cost of Living Monitor, Ipsos found that 80% of Filipinos see the rate of inflation to rise in the next year.

“While economists point out that inflation — and interest rates — have fallen in many countries, you might assume that consumers should be feeling more positive by now about their own financial situation and more optimistic about where their country’s economy is headed in 2025,” Ipsos Chief Executive Officer Ben Page said.

“In fact, they are the opposite. The legacy of high inflation over the past few years is that an expectation of price rises is now hard-wired into the public consciousness,” he added.

The Philippines’ outcome is also much higher than the 65% overall average across 32 countries.

“This is something that is felt across the board. In 21 of the 32 countries surveyed people are more likely to think prices will rise at a faster rate than they did earlier this year,” Ipsos said.

Most Filipinos think that inflation has yet to normalize, the survey showed, with 28% expecting inflation to never return to normal. On the other hand, 27% see prices normalizing after next year, within the next year (26%), within the next six months (5%), and within the next three months (7%).

Only 6% of respondents said that inflation had already normalized.

Inflation quickened to 2.5% in November from 2.3% in October as food prices rose after a series of typhoons hit the country. In the 11-month period, headline inflation averaged 3.2%.

This year so far, inflation has settled within the 2-4% range, except for the 4.4% spike in July.

The central bank expects inflation to settle at 3.1% this year, 3.2% in 2025 and 3.4% in 2026. However, the Bangko Sentral ng Pilipinas (BSP) has said that the risks to the inflation outlook for next year until 2026 have shifted to the upside.

“While inflation rates are going down, people are not feeling it in the way policy makers and central banks would have hoped,” Ipsos said. “People expect price rises across all areas of spending, from utilities to food.”

Globally, 70% of respondents attribute the state of the global economy as the biggest contributor to the rising cost of living. This is followed by government policies (69%), interest rates (66%), businesses making excessive profits (62%) and the Russia-Ukraine war (58%).

Meanwhile, 75% of Filipinos expect interest rates to rise over the next year.

The BSP began its easing cycle in August this year, delivering a total of 50 basis points (bps) worth of rate cuts so far. This brought the benchmark to 6%.

The Monetary Board could deliver another 25-bp cut at its final policy review of the year on Dec. 19.

“There is often a time lag between inflation rates subsiding and consumer confidence returning. But this time things feel rather different. What we are now seeing in many countries is a rise in the number of people who say they are financially struggling,” according to Ipsos.

The survey also showed that 10% of Filipinos expect their own standard of living to fall over the next 12 months.

In terms of financial management, only 37% of Filipinos are “doing alright.” This is compared to the respondents that said they are “just about getting by” (26%), “finding it quite difficult” (20%), “finding it very difficult” (9%), and “living comfortably” (9%).

Meanwhile, 48% of Filipinos see the economy as being currently in a recession, as far as they are aware. On the other hand, 28% say the opposite while 23% do not know.

TAX CUTS

“Across 32 countries people say they prefer tax cuts even if it means less money for public services, over spending more and paying greater taxes,” Ipsos said.

“However, this masks big differences across countries. Türkiye, Romania and the Philippines back tax cuts, while Indonesia and Sweden want better public services.”

The survey found more than half (52%) of Filipinos prefer that their personal taxes be cut even if it means there will be less government spending on public services.

The survey also found 70% of Filipinos expect the taxes that they pay to rise over the next year.

The Department of Finance  has said it does not plan to introduce new taxes this year and potentially until the end of the Marcos administration, apart from those already pending in Congress.

The department’s priority tax measures include the value-added tax on digital service providers, excise taxes on single-use plastics and pickup trucks, the rationalization of the mining fiscal regime, and the motor vehicle road user’s charge, among others.

Source: Business World

Digital payments: How the Philippine economy gains from it

Real-time digital payments are projected to provide banking access to nearly 21 million unbanked Filipinos and contribute to economic growth, according to a report by global payments software provider ACI Worldwide.

The report that ACI published in partnership with London-based economic consultancy firm The Centre for Economics and Business Research used data from 40 countries to try to establish an “empirical link” between real-time payments and financial inclusion.

Real-time digital payments are projected to provide banking access to nearly 21 million unbanked Filipinos and contribute to economic growth, according to a report by global payments software provider ACI Worldwide.

ACI said that boosting financial inclusion by promoting instant payments could contribute an additional $323 million to the Philippines’ gross domestic product (GDP) by 2028.

Meanwhile, the estimated increase in banked Filipinos presents a profit opportunity of $28.7 billion for Philippine financial institutions by 2028, which ACI calculated “based on the typical customer lifetime value estimated at $1,375.“

The report that ACI published in partnership with London-based economic consultancy firm The Centre for Economics and Business Research used data from 40 countries to try to establish an “empirical link” between real-time payments and financial inclusion.

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Digital payments: Its profit prospects for banks

Globally, ACI said instant payments are expected to contribute an additional $285.8 billion to global GDP and create more than 167 million new bank account holders by 2028.

“The rise of real-time payments has the potential to open up banking access to millions of new customers, presenting significant growth and profit potential for banks that capitalize on this to modernize and streamline payment technology and services,” said Leslie Choo, senior vice president at ACI.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that the share of digital payments to total retail payment transactions in the country had grown to 52.8 percent in 2023, from 42.1 percent in 2022.

It was a feat that exceeded the expectations of the central bank, which hoped to digitalize 50 percent of retail payments in the country by 2023. This, in turn, bodes well for the BSP’s goal to capture 70 percent of adult Filipinos into the formal financial system by 2023.

The central bank had said its next goal is to digitalize 60 to 70 percent of retail payments in the country by 2028.

“Real-time payments have asserted their role as a powerful enabler for societal transformation, bridging critical gaps in financial access and empowering millions of Filipinos,” Choo said

Source: Inquirer