MANILA: S&P Global Ratings trimmed its growth forecast for the Philippines this year and 2025.

The debt watcher placed the country’s gross domestic product (GDP) growth at 5.8% this year and 6.1% in 2025, just a tad lower than the 5.9% and 6.2% estimates given in March.

Both forecasts, however, are still below the government’s 6% to 7% and 6.5% to 7.5% growth targets for 2024 and 2025, respectively.

It was noted that strong domestic demand and exports will support continued growth in the country.

The Philippine economy expanded by 5.7% in the first quarter due to slower household consumption and government spending, but enough to outperform most of its neighbours in South-East Asia.

“Domestic demand started out the year on a disappointing note, at least in part due to the high level of interest rates,” Vincent Conti, senior economist at S&P Global Ratings, said on Monday.

Household spending, which accounts for around three-quarters of GDP, grew by 4.6% in the first three months, the slowest since the Covid-19 pandemic hit in 2020.

Total sales of local goods went up by 26.4% year-on-year to US$6.22bil in April, a turnaround from the revised 7.3% drop a month earlier, taking the export receipts in March to the highest level in five months.

Conti also said that a high interest environment will challenge the full recovery of domestic demand.

“Nonetheless, there are favourable base effects in exports that, combined with relatively slower imports due to domestic demand, will provide growth support in the interim,” he added.

The government is also looking forward to rates finally coming down to support economic growth.

The Bangko Sentral ng Pilipinas (BSP) is carefully watching the US Federal Reserve, which kept its policy rate unchanged at 5.25% to 5.5% for a seventh straight meeting earlier this month.

The central bank is now eyeing one rate cut for this year as late as December, scaling back from the three rate cuts it announced in early April.

The BSP has so far kept its benchmark rate steady at a 17-year high of 6.5%, following cumulative hikes of 450 basis points to bring down inflation.

  - ANN