BMI, a Fitch Solutions unit, on Tuesday forecast the Philippines to hit its inflation target of 2 to 4 percent by 2024, which will support the country’s economic growth next year.
In a commentary, BMI said its inflation projection for the country this year will reach 4.7 percent before easing within Bangko Sentral ng Pilipinas’ (BSP) target range of 2 to 4 percent in 2024.
“We expect inflationary pressure to recede over the coming months,” BMI said. “This means that consumer prices will fall back to trend in 2024, offering some much-needed respite for real household incomes.”
It added the easing of price pressures will support private consumption that will also back further expansion of gross domestic product (GDP) next year.
BMI forecast that the GDP growth of the country in 2024 will increase to 6.2 percent, higher than its projection for this year at 5.7 percent, which was revised upward following the better-than-expected economic growth performance in the third quarter this year driven by a sharp rebound in government spending.
It said before achieving the higher GDP growth and lower inflation in 2024, “high interest rates will keep a cap on investment activity” as it expects the central bank to raise another 25 basis points in the upcoming monetary board meeting this month.
“Subsequently, we think that BSP will only cut rates in the second half of 2024, in line with our expectations for the US Federal Reserve,” BMI said.
BMI added that risks to outlook largely hinge on the outlook for the global economy.
“If the US were to successfully avoid a recession in 2024, this would help bolster Philippine export performance. In the same vein, a better-than-expected economic performance by the Chinese economy will also have a similar impact on the Philippine external sector,” the Fitch Solutions’ research arm said.*PNA