The Philippine economy could grow slightly slower by 6.1 percent this year and 6.3 percent in the next, according to the quarterly report by the ASEAN+3 Macroeconomic Research Office (AMRO) on Tuesday.

Previously, AMRO forecasted the local economy to expand by 6.3 percent this year and 6.5 percent in 2025.

However, the new projections are higher than last year’s 5.6 percent growth based on data from the Philippine Statistics Authority.

“The overall balance of risks to the outlook has improved, but downside risks remain, especially with regards to inflation and tighter-than-expected US monetary policy,” AMRO said.

Prices of some agricultural products might increase as farm production becomes hampered by heavy rains from La Niña, according to AMRO.

However, the ASEAN research group stressed that overall inflation will be “contained” as the volumes and prices of imports will remain generally favorable despite attacks between Israel and Houthis, an Iranian-backed rebel group, in the Red Sea.

Confidence among exporters

“Despite concerns about the sharp increase in global shipping prices due to disruptions in the Red Sea, the April‒June Purchasing Managers’ Index indicators continue to suggest confidence among ASEAN+3 exporters,” AMRO said.

ASEAN+3 inflation, excluding those of Laos and Myanmar, could decline to 2.1 percent this year from the 2.5 percent AMRO initially projected.

ASEAN+3 consists of the 10 members of the Association of Southeast Asian Nations or ASEAN, plus China, Hong Kong, Japan and South Korea.

Elevated US rates

Meanwhile, AMRO said US interest rates might remain elevated which could withdraw debt investments from ASEAN+3.

Analysts now believe the Federal Reserve will impose one rate cut this year from three rounds they initially projected as the US strives to ease its own inflation.

While a high US rate also weakens non-US dollar currencies and increases prices of imported goods, AMRO said the Philippine currency will remain manageable due to the Bangko Sentral ng Pilipinas’ efficient monetary policy.

“Most regional currencies continue to weaken against the US dollar, albeit at a more modest pace than at the start of the year—except for Japan,” AMRO shared.

AMRO expects continued demand for Philippine semiconductors which grew by about 30 percent starting October last year from a decline of 30 percent in July.

“External trade is set to return to positive territory this year, which will supplement strong domestic consumption and the continuing recovery in tourism.,” AMRO said.