Robust household spending, low unemployment and election-related economic activity are expected to bolster the country's economic growth, potentially hitting the official target.
Bank of the Philippine Islands (BPI) expects a 6.3-percent economic expansion for 2025, with household consumption remaining its biggest driver.
The government is aiming for 6.0- to 8.0-percent annual growth this year, wider than the 6.0 to 6.5 percent for 2024 that most analysts expect to have been missed.
"The factors sustaining consumption over the past decade, such as remittance inflows, have remained in place despite the economic slowdown in major economies," BPI lead economist Emilio Neri said.
"With aging populations abroad driving the demand for labor, the impact of headwinds on remittances like trade barriers and anti-immigration sentiment will likely be limited," he added.
Low unemployment, particularly in the services sector, is also expected to sustain household income growth and expand the middle class.
While concerns about job displacement due to artificial intelligence (AI) persist, Neri said there would be minimal disruption as adoption of the technology remained in its infancy.
AI, he added, could potentially enhance labor productivity for companies that leverage the technology effectively.
Meanwhile, "the economy also stands to benefit from the recent reduction in interest rates and provision of additional liquidity through the reserve requirement ratio."
"Private sector spending in construction activities has not yet returned to pre-pandemic levels, but lower interest rates may fast track its recovery," Neri said.
The Bangko Sentral ng Pilipinas (BSP), which lowered its policy rate by 75 basis points (bps) to 5.75 percent last year, was forecast to cut by 50 bps this year.
The central bank was earlier expected to cut by as much as 100 bps amid a favorable inflation outlook, but concerns over protectionist threats made by US President-elect Donald Trump have prompted analysts to revise their outlooks.
Neri said that global uncertainties, particularly the policy direction of the US Federal Reserve (Fed) under a second Trump administration, could influence the peso's performance and limit the extent of monetary easing.
"Rate cuts in the first half of the year appear feasible, but the latter half may bring challenges as the Federal Reserve could shift its policy stance in response to President Trump's policies," he said.
Neri added that "depreciation pressure on the peso may persist as markets continue to assess the potential impact of Republican policies on inflation and monetary policy."
The Fed's anticipated 50-bp rate cut this year, contingent on US economic data, could also play a role in shaping currency trends.
Source: Manila Times
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