(Bloomberg) — According to Finance Secretary Ralph Recto, the Philippine economy could grow by as much as 7% this year, bolstered by interest rate reductions that are expected to stimulate both investment and consumption, despite worries about political stability.
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“We don’t anticipate that occurring. Not at all,” Recto stated in an interview with Bloomberg Television’s Haslinda Amin on Wednesday, in response to a question about the potential for political chaos following the recent arrest of former leader Rodrigo Duterte over his controversial anti-drug campaign.
While attending the InvestPH 2025 forum in Manila, the finance chief, who is part of the seven-member monetary policy board of the Bangko Sentral ng Pilipinas, indicated expectations for total interest rate cuts of 50–75 basis points this year. He noted that the BSP could potentially initiate monetary easing at its next meeting on April 10, which would contribute to a projected GDP growth of at least 6% this year.
The Philippines, frequently recognized as one of Asia’s economic powerhouses, might experience a slowdown in momentum due to high borrowing costs, a sluggish stock market, and increasing political uncertainties. The investment banking division of the country’s largest lender, BDO Unibank Inc., remarked shortly after Duterte’s arrest that the political climate is contributing to challenges in a market already facing global uncertainties.
However, there are positive developments. February saw a significant decrease in inflation, which is currently within the central bank’s target range of 2% to 4%, and Recto mentioned that inflation remains manageable. The peso has also maintained relative stability.
Over the past month, the Philippine peso has appreciated by 1.6%, marking the best performance among Asia’s most active currencies. Furthermore, the Philippine Stock Exchange is anticipating three major initial public offerings (IPOs) this year to invigorate the currently lackluster equity trading environment, according to bourse President Ramon Monzon.
Monzon expressed confidence that the stock market is unlikely to be adversely affected by political events, noting that the benchmark index has actually risen since Duterte’s arrest. “This is merely political noise accompanied by a lot of misinformation on social media. I believe the business sector is moving forward.”
Flexibility
The central bank predicts that inflation will remain within target levels for the next two years, providing monetary authorities with the “flexibility” to consider “reducing policy tightness,” stated BSP Assistant Governor Zeno Abenoja during the forum.
According to Recto, the government aims to raise approximately 100 billion pesos ($1.75 billion) from selling state assets, including a hydroelectric power facility.
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The finance chief also mentioned that there is “very little remaining” of the amount the government needs to raise from the international bond market this year to support the budget.
With investment-grade sovereign credit ratings, the Philippines sold $3.3 billion worth of dollar and euro bonds in January, covering most of its overseas funding needs for 2025 as it aims to fund a budget deficit of about 1.54 trillion pesos this year, which is equivalent to 5.3% of GDP.
InvestPH 2025 is a joint initiative organized by the Philippine Stock Exchange and co-hosted by Bloomberg LP, the parent company of Bloomberg News.
–With contributions from Clarissa Batino, Cecilia Yap, Andreo Calonzo, Neil Jerome Morales, and Cliff Venzon.
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