Global financial firm Citi projects the economy to slightly contract to 5.8 percent this year and grow to six percent in the next as both government and public consumption remain robust and investments flow in.

In an analysis released Monday, Citi said it lowered its 2024 forecast from six percent due to bigger economic losses in the third quarter (Q3) with a 5.2 percent growth in gross domestic product (GDP) or lower than the 6.4 percent estimated by the multinational bank.

“A weak Q3 outturn had been a result of several temporary, weather-related factors. We expect growth to pick up in Q4, supported by stronger domestic demand that is likely to be bolstered by lower policy rates and inflation,” Citi said.

The Bangko Sentral ng Pilipinas’ inflation outlook report released on 5 November said overall prices might continue to settle near 2 percent in the remaining months of the year due to lower tariffs on imported rice at 15 percent from 35 percent.

October inflation

The Philippine Statistics Authority reported October inflation reached 2.3 percent, up from 1.9 percent in September after prices of some foods and beverages rose due to costlier food transport caused by recent typhoons.

Specifically, rice prices grew to 9.6 percent from 5.7 percent year-on-year. However, compared to last month, prices of the commodity declined. On the other hand, Core inflation, which excludes volatile items like food and fuel, stabilized at 2.4 percent year-on-year.

In terms of GDP, national statistics showed slower manufacturing and infrastructure activities due to bad weather which caused work suspensions, including construction of government projects.

Government spending slowed to 5 percent in the third quarter from 11.9 percent in the previous quarter.

Still, Citi expects the central bank to further reduce its current six percent policy rate as overall inflation will likely remain manageable, helping spur higher economic growth.

Misleading view

“Nonetheless, we think it would be misleading to view the weaker Q3 expansion as the start of a slowdown as several negative factors in Q3 are one-off events,” the global bank said.

“With storm season passing soon, we also expect infrastructure projects’ progress to proceed at a faster clip in Q4 and Q1 2025,” Citi added.

Poinsettias in Quezon City

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