Below-target growth likely in 1st half of 2025

Philippine economic growth is likely to fall short of the government’s target in the first two quarters, GlobalSource Partners said.

“Our assessments show that GDP (gross domestic product) may be expected to increase within a narrow band over the next two quarters — rising from just above 5.7% in first quarter to approximately 5.9% in second quarter,” GlobalSource country analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said in a report.

This would be below the Development Budget Coordination Committee’s (DBCC) 6-8% target band until 2028.

GlobalSource’s first-quarter growth forecast of 5.7% would be slower than the 5.8% print in the same period in 2024.

For the second quarter, GlobalSource’s 5.9% GDP growth projection would be slower than the 6.4% print in the same period in 2024.

“This modest upward trend is driven by resilient historical GDP performance, growth in the services sector, and short-term USD/PHP exchange rate effects,” GlobalSource said.

However, local and geopolitical risks may affect the growth outlook in the first half.

“If both domestic and geopolitical shocks occur in a big, adverse way, they could unsurprisingly alter the outcome of this initial analysis,” GlobalSource said.

National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan earlier this month said government growth targets may need to be revisited amid rising global economic uncertainty.

“It’s too early to change at this point but we need to be watchful and be flexible because of this uncertainty,” he said.

A DBCC meeting is scheduled to be held at the end of March.

Budget Secretary and DBCC Chair Amenah F. Pangandaman has said that the committee historically keeps its target unchanged during the first and second quarters of the year.

Earlier, Finance Secretary Ralph G. Recto said that “6-6.5% [growth] is doable for 2025.”

However, GlobalSource said the Philippine economy should grow faster than the DBCC’s 6-8% target.

“The economic scarring of the pandemic actually requires the Philippines to grow by much more than the targeted growth rates of 6-8% through the end of the Marcos administration. Persistent poverty and income inequality are additional imperatives to grow by much more,” it said.

During the MAP Economic Briefing and General Membership Meeting on March 12, Mr. Guinigundo said that Philippine GDP growth of 6-8% annually would bring the economy to around P60 trillion by 2036

“To overcome this setback, growth will have to be between 9% and 9.5% through 2028 to be able to return to the original growth path,” he said.

In 2024, the economy expanded by 5.6%, from the 5.5% print in 2023 amid subdued consumption and lower farm output. It fell short of the government’s revised 6-6.5% target.

“It’s easy to blame the onslaught of typhoons during the latter part of the year, which constrained economic expansion. Such weather disturbances could indeed explain part of the failure, but not the entire dynamics,” GlobalSource said.

The economy grew by 5.2% in the fourth quarter, slower than the 5.5% print in the same period in 2023 after a series of typhoons hurt agricultural output.

“Sufficient stock buffering, mangrove propagation, zonal building along the coasts could have also mitigated the effects of these supply shocks. Yes, food inflation likewise deterred economic growth because private consumption spending was generally restrained,” GlobalSource said.

NEDA Undersecretary for Policy and Planning Group Rosemarie G. Edillon attributed the weaker-than-expected GDP growth in 2024 to “extreme weather events, geopolitical tensions, and subdued global demand.”

Source: Business World

Land-area minimums imposed for pharma economic zones

The Philippine Economic Zone Authority (PEZA) said pharmaceutical economic zones (pharma zones) must be built on sites with an area of at least 10,000 square meters (sq.m.) in major cities.

According to PEZA Board Resolution No. 25-050, the minimum size applies to pharma the minimum contiguous land area for pharma zones in the National Capital Region (NCR) and other metropolitan areas.

The minimum land requirement for pharma zones outside the NCR and other metropolitan areas is 50,000 sq.m.

“The release of the guidelines provides clear direction on the establishment of pharma zones,” PEZA Director General Tereso O. Panga said.

“These zones are expected to attract substantial pharma, medical, and healthcare-related investments, advanced technology, and increase local production and research — creating numerous jobs and enhancing the country’s export potential — positioning the Philippines as a competitive player in the global pharmaceutical market,” he added.

According to the investment promotion agency, the board approved the guidelines in a meeting late last month.

“The move was in response to the directives of President Ferdinand R. Marcos, Jr. to make medicines more accessible to the Filipino people and to encourage more local producers to boost their R&D and manufacturing capabilities and lower drug costs for the general public,” PEZA said.

Aside from the land area requirements, the guidelines also outlined the preferred investments that can be registered with PEZA to avail of incentives on offer for pharma zones.

These activities include research, development, and manufacturing of medical drugs and devices, active ingredients, biologicals, vaccines, in vitro diagnostic reagents, and radiation-emitting devices or equipment.

“This shall include activities related to raw materials, packaging materials, and other pharmaceuticals, medical devices, or health products as may be certified by the FDA (Food and Drug Administration),” according to the resolution.

It added that the “pharma zone registered business enterprise (RBE) shall efficiently operate and contribute to the development of the preferred area in particular and of the national economy in general.”

Under Title XIII of the Tax Code, fiscal incentives that pharma zone RBEs are eligible for include income tax holidays, special corporate income tax, and enhanced deductions regimes, among others.

Aside from the fiscal incentives, the RBEs can also employ foreign nationals in executive, supervisory, or advisory positions, with PEZA visas allowing multiple entry issued to non-resident foreign nationals and their qualified dependents.

They can also enjoy streamlined processing of applications for environmental compliance certificates and applications for permits, licenses, or certifications, and simplified customs procedures.

However, the resolution clarified that partially developed or existing economic zones, facilities, and existing RBEs are not entitled to the incentives.

Source: Business World

Philippines needs 9-9.5% growth to return to pre-pandemic track

The economy needs to grow by at least 9% to 9.5% a year until 2028 to return to its pre-pandemic growth track, a former Bangko Sentral ng Pilipinas (BSP) official said.

During the MAP Economic Briefing and General Membership Meeting, GlobalSource Partners analyst Diwa C. Guinigundo said that the current government’s target of “between 6% to 8% annually, by 2036 (the Philippines) should be reaching only P60 trillion.”

“To overcome this setback, growth will have to be between 9% to 9.5% through 2028 to be able to return to the original growth path,” he said.

Last year, Mr. Guinigundo pushed for targets of 9.4% growth.

The Development Budget Coordination Committee (DBCC) on December trimmed the economic growth estimate for this year to 6-6.5% but widened the target band to 6-8% until 2028, due to “evolving domestic and global uncertainties.”

Finance Secretary Ralph G. Recto described as “doable” growth of between 6% and 6.5%.

In 2024, the economy expanded by 5.6%, following a 5.5% reading in 2023. It fell short of the government’s revised 6-6.5% target.

“We grew by only 5.5% in 2023 and 5.6% last year. Of course, we take pride in saying Philippine growth performance surpassed the global average in 2022 and 2023 of 3.5% and 3.3% respectively,” he said. 

“But we had the economy stall in 2020 and the years following that, so we have a lot of catching up to do.”

Mr. Guinigundo said risks to the economy include fiscal and debt sustainability, with revenue effort remaining low, food security issues, and political disunity.

“Since the Trump policy of tariff increases and tax cuts are potentially inflationary, we don’t expect the Fed to be very aggressive in reducing the target interest rate,” he added in his presentation.

“With the BSP having the space to further ease monetary policy, we see a potential capital outflow, peso depreciation, and therefore, the resurgence of inflation.”

Mr. Guinigundo noted that the budget deficit, which narrowed to P1.506 trillion in 2024, remains  in the “trillion mark.”

He said improved tax administration can only yield much, as can “squeezing” state-run firms for more dividends.

“This is after Congress forced the split banks and other GOCCs to continue to the Maharlika Investment Fund. No wonder, from the pre-pandemic (debt) of $7.7 trillion, we saw the crisis ending at $16 trillion. In January 2025, $300 billion was added to National Government debt,” he said.

Source: Business World