Philippines to be one of the fastest growing economies in Asia by 2024

In the third quarter of 2024, the Philippines’ economic growth rate stabilized at 5.2%, bringing the average growth rate in the first three quarters to 5.8%, showing extraordinary resilience in 2024. During this period, the country’s economic growth rate outpaced Malaysia (5.2%), Indonesia (5.0%), China (4.8%) and Singapore (3.8%). Growth was driven primarily by robust capital formation and accelerated government spending.

Philippine manufacturing sector continues to grow

According to the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI), the PMI rose to 54.3 in December 2024, marking the 16th consecutive month of expansion and reaching its highest point since April 2022. This key factory performance indicator further improved from 53.8 in November.

S&P Global Market Intelligence economist Maryam Baluch noted that new orders and output in the Philippines increased significantly in December 2024, with companies expanding their purchasing activities to meet production needs. December showed inflation pressures easing, in contrast to a surge in November. In fact, cost burdens and output price increases have remained historically low.

The two largest components in the PMI calculation (the output index and the new orders index) had a positive impact on the overall number, thanks to strong underlying demand trends, product diversification and the acquisition of new customers. The growth in production demand has prompted manufacturers to step up their purchasing activities, with input purchases rising sharply and reaching the highest level in nearly two years.

Meanwhile, a 75 basis point rate cut by the Bangko Sentral ng Pilipinas in 2024 lowered borrowing costs for manufacturers. The Corporate Recovery and Tax Incentives Promotion Act (CREATE MORE) signed into law in November 2024 will further boost manufacturing activity by attracting more foreign direct investment.

Other factors driving the strong performance of the PMI include lower global crude oil and commodity prices, which helped reduce input costs for manufacturers.

The Philippine government is on track to keep inflation within its target range through 2024, the Department of Finance (DOF) said. Inflation is expected to average 6.0% in 2023 and slow to 3.2% by the end of November 2024. Overall inflation is expected to average 3.1% to 3.3% in 2025.

The easing of inflation and the possible further reduction of local policy interest rates in the future will further stimulate the development of the manufacturing industry. The lower limit of the economic growth target of 6% to 6.5% is expected to be achieved in 2025.