The country’s main socioeconomic think tank, Philippine Institute for Development Studies, expects the country’s economy to be resilient in 2024 despite a challenging global environment, with domestic consumption as a critical growth driver.
This forecast is based on a recently-released study, “Macroeconomic Outlook of the Philippines in 2023-2024: Prospects and Perils,” authored by PIDS Research Fellow Margarita Debuque-Gonzales and research analysts Mark Gerald Ruiz and Ramona Maria Miral.
Key growth driver
“A key driver of growth in 2024 is expected to be domestic consumption, supported by a steady flow of remittances from overseas Filipinos, rising wages that partially offset declining purchasing power, and an improving job market with an increasing number of wage and salary earners,” the authors wrote in their study.
“This robust domestic demand is projected to act as a buffer against the impact of a weaker global outlook,” they added.
While the global economic landscape faces uncertainties, PIDS said the Philippines appears poised to navigate challenges by relying on the strength of its internal economic drivers.
The PIDS also expects the country to see some relief on the inflation front this year as the authors expect rates to ease within Bangko Sentral ng Pilipinas’ target range of two to four percent inflation rate later this year.
While headline inflation is projected to average six percent in 2023 due to supply-chain disruptions, the authors of the PIDS study warned that there are several potential risks that the country could face amid the positive outlook.
Challenges
The authors mentioned that a combination of conflicting messages and poorly timed monetary policy decisions could present challenges.
Moreover, apprehensions were expressed about possible setbacks in implementing fiscal policy reforms, specifically in outlining the nation’s medium-term fiscal framework.
The authors called for a thorough strategy addressing fiscal sustainability, calling for transparency regarding additional revenues derived from legislative actions and the schedule for deficit-reducing measures.
Another critical aspect
The effective administration of the recently established Maharlika Investment Fund is identified as another critical aspect.
“(While) it holds potential for boosting economic growth and development, its success hinges on strong governance and clear objectives,” the authors said.
The PIDS authors saw the need to appoint “a credible board and professional management team” to ensure sound governance and minimize the risk of political interference.