Philippine Economic Growth Projected at 6.0% for 2024, Supported by Infrastructure Investment and Monetary Easing

The ADB attributes the anticipated expansion in gross domestic product (GDP) to a broad-based domestic demand, supported by lower inflation and interest rates.

According to a report released today by the Asian Development Bank (ADB), moderated inflation, monetary easing, and sustained public spending—particularly on major infrastructure projects—are set to bolster the Philippine economy, forecasting growth at 6.0% for 2024 and 6.2% for 2025. The findings are detailed in the ADB’s September 2024 Asian Development Outlook (ADO) report.

The ADB attributes the anticipated expansion in gross domestic product (GDP) to a broad-based domestic demand, supported by lower inflation and interest rates. The inflation forecast has been revised down to 3.6% for 2024, a decrease from the April estimate of 3.8%. This decline is primarily due to the sustained decrease in food prices, influenced by lower tariffs on rice imports. Furthermore, inflation is projected to ease further to 3.2% in 2025, compared to the previous estimate of 3.4%.

Pavit Ramachandran, ADB Philippines Country Director, emphasized the favorable conditions for sustained economic growth, stating, “Most of the ingredients for the Philippines’ sustained economic growth are in place—rising government revenues are boosting public expenditures on infrastructure and social services, increasing employment is driving consumption, and reforms to open the economy to more investments are underway. With inflation slowing, the country is in a strong position to lead growth in Southeast Asia.”

However, the report highlights potential risks to this optimistic outlook, including severe weather events that could spike inflation. Additionally, external threats such as a sharper slowdown in major advanced economies, financial volatility resulting from US monetary policy changes, geopolitical tensions, and rising global commodity prices could impact growth.

The Philippine government anticipates that public infrastructure spending will range between 5.0% and 6.0% of GDP annually from 2024 to 2028, building on a recorded 5.8% of GDP in 2023. The government’s ambitious “Build Better More” infrastructure program currently includes 66 ongoing projects and an additional 31 approved for implementation as of August 2024.

This comprehensive infrastructure initiative aims to enhance physical connectivity through projects involving railways, bridges, and airports, while also addressing water management through improved irrigation, water supply, and flood control. Moreover, it prioritizes climate change mitigation and adaptation, digital connectivity, energy, and agricultural development.

Key projects funded by ADB include the Malolos-Clark Railway Project and the South Commuter Railway Project, both designed to connect Metro Manila with northern and southern provinces in Luzon. ADB is also supporting the Bataan-Cavite Interlink Bridge Project and the Integrated Flood Resilience and Adaptation Project, aimed at enhancing resilience to floods and climate change across three major river basins in the country.

With these strategies in place, the Philippines is poised to navigate potential challenges while leveraging infrastructure investment as a cornerstone of its economic growth strategy.