Economy falls way below its 2024 growth target

THE economy fell well short of its 2024 growth target, officials said Thursday, as deadly typhoons and drought dampened economic activity. Analysts, however, said they see an economic rebound this year (see story on page B1).

Gross domestic product (GDP) for the year ticked up slightly to 5.6 percent compared with 5.5 percent in 2023, the Philippine Statistics Authority (PSA) said.

But that failed to approach the government's target of 6 to 6.5 percent, Economic Planning Undersecretary Rosemarie Edillon told a news conference, blaming a dry spell in the early part of the year and six consecutive typhoons that pummelled the country in October and November.

"These extreme weather conditions led to a 1.8 percent year-on-year contraction in the agriculture, forestry and fishery sector," Edillon said.

The succession of typhoons also dampened tourism, the government agency said, even as industry and the services sector remained key growth drivers.

Scientists from the World Weather Attribution network concluded in a report last month that human-induced climate change had fuelled the rare string of typhoons that struck the Philippines, killing more than 170 people and causing hundreds of millions of dollars' worth of damage.

The Philippines also topped the World Risk Report last year of countries threatened by "extreme weather events."

"It is clear then that the key to economic growth in the new normal is to build resilience and ensure adaptability to changing preferences," Edillon said.

The fourth quarter GDP growth matched the previous quarter's 5.2 percent expansion but was below the median forecast of 5.4 percent growth in a Reuters poll of economists.

Philippine stocks fell as much as 0.3 percent after the data, their lowest level since mid-November 2023.

On a quarterly basis, the Philippines grew a seasonally adjusted 1.8 percent in the October-December quarter, data from the PSA showed, below the 1.9 percent forecast in the poll.

Farm output in the last quarter shrank 2.2 percent, a third successive quarterly contraction, although the pace of decline slowed, with reduced crops, livestock and fish production, the PSA said.

Household consumption grew 4.7 percent in the fourth quarter, slower than the prior quarter's 5.2 percent growth, offsetting the impact of the 9.7 percent increase in government consumption, which was higher than the previous quarter's 5 percent expansion.

Last month, the government widened its growth target for 2025-2028 to a range of 6 to 8 percent, from 6.5 to 7.5 percent for 2025 and 6.5 to 8 percent in 2026-2028 to account for what it said were evolving global uncertainties.

Edillon said the government is confident of hitting the low end of this-year's growth target.

Despite the lower numbers for 2024, analysts said they expect the country to rebound this year on the back of easing interest rates.

Socioeconomic Planning Secretary Arsenio Balisacan vowed to regain the country's growth momentum this year, on the back of strategic investments and initiatives designed to strengthen resilience and lay the foundation for long-term, inclusive growth.

Balisacan stressed that "infrastructure development remains a crucial driver of economic recovery and long-term growth."

Meanwhile, analysts believed that further easing of the key policy rate would help lift the economy this year.

"We expect the growth will pick up in 2025, supported by more accommodative monetary policy and anticipated well-contained inflation," Oxford Economics economist Sunny Lui said.

"Nevertheless, uncertainty around US tariff policies, tighter than expected financial conditions and increased geopolitical risks present some downside risks to growth," Lui added.

The Bangko Sentral ng Pilipinas' policymaking body, the Monetary Board, cut key interest rates by 75 basis points (bps) last year, which brought the benchmark rate to 5.75 percent.

It was previously expected to cut by as much as 100 bps this year but is now seen easing by just 50 bps amid uncertainties over the pace of US Federal Reserve rate reductions.

Lui said economic growth will "gain some momentum in 2025."

"With more accommodative monetary policy — we expect three 25 bps rate cuts in the first three quarters — and likely well-contained inflation, consumer spending and investment are both likely to strengthen," she said.

Capital Economics echoed this, saying interest rate cuts would help offset the drag from weaker exports and tighter fiscal policy.

"We think the economy will grow by 6.0 percent this year," it said.

"Strong and steady growth supports our view that the easing cycle will remain gradual over the coming months and we are expecting a further 100bps of cuts in 2025," it added.

Capital Economics, however, warned that a key uncertainty for the coming year is whether Donald Trump will follow through on his threats to impose tariffs and tighten immigration rules.

While the Philippines is less exposed to tariffs than other countries in the region, Trump's deportation plans could hurt remittances from the US, which account for about 3.5 percent of the country's GDP.