First-quarter growth likely at 5.8%

THE challenging global environment is expected to drag the country's economic performance, with first-quarter growth likely falling short of target.

In a The Manila Times poll of economists, views on the country's growth were partially mixed, as some anticipated a lower growth figure, while others anticipated the country to hit the lower end of the 6- to 8-percent target of the government.

The median forecast was 5.8 percent, up from the previous quarter's 5.2 percent and 5.7 percent recorded in the same period last year.

Preliminary first-quarter gross domestic growth (GDP) data will be released by the Philippine Statistics Authority (PSA) on Thursday, May 8.

The country's economic managers are still hopeful to hit at least the 6-percent target this year despite the external uncertainty, particularly the reciprocal tariffs pushed by the United States.

While most multilateral organizations have already trimmed their growth outlook for the country, the economic managers said that it is too early to revise their growth targets.

Having the lowest forecast of 5.5 percent, Emmanuel Lopez from the University of Santo Tomas Graduate School said the country's growth would be weighed down by weaker global demand, trade-related headwinds, high US tariffs, and the impact of financial tightening.

“However, we should expect the economy to grow by 6.1 percent to 6.5 percent in 2025, supported by more accommodative financial conditions,” Lopez said.

For his part, Union Bank of the Philippines chief economist Ruben Carlo Asuncion and Chinabank Research said economic growth may have reached 5.7 percent in the first three months of the year.

Asuncion said the economy is showing some strength despite global challenges. While still below 6 percent, growth was supported by lower inflation due to cheaper rice, better job numbers in February, modest export gains ahead of new US tariffs, increased government spending on infrastructure, and steady remittances helped by a weak peso.

However, he said that weak business confidence likely held back growth, as firms prepared for higher US tariffs.

“Amid persistent global trade uncertainties, the question is whether the expected first-quarter GDP growth that will outpace second-half 2024 gains, is the best we can attain for the year,” Asuncion said.

“We hope to see more BSP (Bangko Sentral ng Pilipinas) rate cuts that will mitigate the high real interest rate setting, and bolster growth resiliency amid Trump 2.0 tariff hikes,” he added.

Household consumption

Meanwhile, Chinabank Research said that household consumption would likely be the economy's main growth driver, supported by benign inflation, steady remittance inflows, and campaign-related spending for the midterm elections.

“However, overall GDP growth was tempered by a wider trade in goods deficit,” it said.

“We expect the Philippine economy to continue growing at a moderate pace, supported by subdued inflation and lower borrowing costs,” Chinabank Research added. “However, a potential slowdown in the global economy amid steep tariffs and policy uncertainty remains a key downside risk to the growth outlook.”

At 5.8 percent, Pantheon Macroeconomics economist Miguel Chanco said that risks are tilted slightly to the upside.

“For the most part, the economy had a solid start to the year on all fronts, but the Q1 (first quarter) numbers are also 'dated' in an additional sense that the world economy has changed markedly since the US announced its Liberation Day tariffs in early April,” he said.

ING Manila Bank expects growth to accelerate to 5.9 percent year over year, primarily driven by a rebound in private consumption.

“This recovery follows a cooling of inflation, supported by interest rate cuts and improved monetary policy transmission, which are boosting credit growth,” ING said.

Having the highest forecast of 6.2 percent, Rizal Commercial Banking Corp. chief economist Michael Ricafort and Philippine National Bank economist Alvin Arogo said that improving inflation outlook and activities related to the mid-term election could bolster the country's economic growth.

“Growth forecast of 6.2 percent mainly driven by the likely rebound in food and nonalcoholic beverages spending due to low inflation as well as election-related activities,” Arogo said.

Ricafort, meanwhile, said that “easing inflation trend would support future cuts in key policy rates that would fundamentally lead to faster economic growth than otherwise.”

“Easing inflation would also fundamentally lead to more disposable income that could support consumer spending, which accounted for nearly 75 percent of the Philippine economy,” he added.