The Philippine economy fell short of its 2024 growth target due to the impact of typhoons and drought. While GDP saw a slight increase, it failed to reach the projected range. Analysts predict a rebound in 2025, driven by easing interest rates and government initiatives.
The Philippine economy fell short of its 2024 growth target, according to officials, as devastating typhoons and prolonged droughts hindered economic activity. While Gross Domestic Product (GDP) saw a slight increase to 5.6 percent compared to 5.5 percent in 2023, this figure failed to reach the government's projected range of 6 to 6.5 percent. The Philippine Statistics Authority (PSA) attributed the shortfall to extreme weather conditions that significantly impacted various sectors.
A severe dry spell at the beginning of the year, coupled with six consecutive typhoons that battered the country in October and November, resulted in a 1.8 percent year-on-year contraction in the agriculture, forestry, and fishery sector. The succession of typhoons also dampened the tourism industry, although the industrial and services sectors remained key drivers of growth. Scientists from the World Weather Attribution network concluded that human-induced climate change exacerbated the frequency and intensity of these typhoons, leading to over 170 casualties and billions of dollars in damage. The Philippines ranked first in the World Risk Report for 2023 among countries vulnerable to extreme weather events. Recognizing the urgent need to adapt, the government emphasized the importance of building resilience and flexibility in the face of evolving global challenges.Despite falling short of the 2024 target, economic analysts anticipate a rebound in 2025, driven by the easing of interest rates. Socioeconomic Planning Secretary Arsenio Balisacan expressed confidence in regaining the country's growth momentum through strategic investments and initiatives aimed at strengthening resilience and fostering long-term, inclusive growth. Infrastructure development, according to Balisacan, remains a crucial catalyst for economic recovery and sustained expansion.Analysts believe that further reductions in key policy rates will contribute to the economic uplift in 2025. Oxford Economics economist Sunny Lui predicts that growth will accelerate, supported by more accommodative monetary policy and anticipated well-controlled inflation. These factors, Lui suggests, will likely stimulate consumer spending and investment. However, she also acknowledges potential downside risks, including uncertainties surrounding US tariff policies, tighter financial conditions, and escalating geopolitical tensions. The Bangko Sentral ng Pilipinas' Monetary Board reduced key interest rates by 75 basis points in 2023, bringing the benchmark rate to 5.75 percent. While initial projections anticipated a further reduction of up to 100 basis points in 2024, the current outlook suggests a more moderate easing of 50 basis points, influenced by uncertainties regarding the pace of US Federal Reserve rate reductions. Lui anticipates a resumption of growth momentum in 2025, driven by accommodative monetary policy and likely controlled inflation. Capital Economics echoes this sentiment, emphasizing that interest rate cuts will help mitigate the impact of weaker exports and tighter fiscal policy. The firm forecasts a 6.0 percent growth rate for 2024. Capital Economics also predicts a continued easing cycle in the coming months, with a projected 100 basis points of cuts in 2025. However, they caution that a key uncertainty for the year ahead is whether Donald Trump will follow through on his threats to impose tariffs and tighten immigration rules
Philippine Economy GDP Growth Typhoons Drought Economic Rebound Interest Rates Government Initiatives
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