The Philippine economy is expected to expand by over six percent in the second quarter of 2024, driven by base effects and improved government spending, according to HSBC. This projection aligns with the government’s target of six to seven percent growth for the year.
Aris Dacanay, an economist for ASEAN at HSBC, stated in a Phil Star report that the country’s GDP growth likely accelerated to above six percent in the second quarter, up from 5.7 percent in the first quarter and 4.3 percent in the same period last year. “With the spending plan in check, consumption slowing down but still robust, and investments cooling but not falling off a cliff, quarter-on-quarter growth should be a little less than potential, but year-on-year growth should be above six percent,” Dacanay explained.
The economic boost is partly attributed to the recently approved tariff reduction on rice, which could add 1.4 percentage points to overall growth this year. President Marcos has reduced the tariff for imported rice from 35 percent to 15 percent until 2028 to lower rice prices for the poorest consumers. This move is expected to free up around two percent of household budgets, particularly benefiting low-income households.
“Cutting the tariff rate of rice by 20 percentage points could unlock around two percent of household budgets to be spent on other things,” Dacanay noted. With household consumption representing 70 percent of the economy, this boost in disposable income is anticipated to support consumption and overall growth.
However, Dacanay also highlighted the potential downside risks to the inflation outlook. “If the rice tariff rate cut happens soon, it poses a big downside risk to the inflation outlook, and perhaps inflation will not breach the four percent target in the second quarter,” he said. The tariff cuts could potentially ease inflation by up to 1.8 percentage points this year.
Despite these positive projections, HSBC has not included the tariff rate cuts in its official growth and inflation forecasts. The bank expects the Philippine economy to grow by 5.8 percent this year and 6.1 percent in 2025, both below the government’s targets. Inflation is predicted to average 3.6 percent this year and rise to 3.8 percent next year.
