PHILIPPINE growth will likely slow this year but remain one of the highest among the Asean-6 economies that include Vietnam, Malaysia, Singapore, Indonesia and Thailand, DBS Bank Ltd. said.

In a January outlook for the six Association of Southeast Asian Nations (Asean) countries, the Singaporean multinational forecast Philippine gross domestic product (GDP) growth of 5.3 percent for 2024, short of the government’s target of 6.5-7.5 percent and moderating from the expected 5.8 percent for last year

Full-year GDP results will be released at the end of this month. As of end-October, growth remained below target at 5.5 percent.

“[T]he Philippines will stand out with slower 2024 expansion, dampened by the lagged impact of high interest rates, following the most aggressive monetary tightening cycle in the region,” DBS said.

GDP growth was projected to improve to 5.4 percent next year but this also remains below the government’s medium-term target of 6.5-8.0 percent.

Vietnam is expected to lead Asean-6 growth this year and the next with 6.0-percent and 6.8-percent expansions, respectively. Indonesia (5.0 percent for 2024 and 5.2 percent for 2025) is in third after the Philippines.

Malaysia, meanwhile, is forecast to post 4.8-percent growth this year and the next, Thailand by 3.3 percent and 3.0 percent, and Singapore by 2.2 percent and 2.5 percent.

DBS said that collectively, Asean-6 should see growth improve to 4.7 percent from 4.2 percent in 2023.

“The growth uptick will be driven by trade-oriented economies, aided by a bottoming and fragile recovery in the electronics cycle, with continued support from travel and tourism,” the bank added.

“Malaysia, Singapore, Thailand and Vietnam will be the key beneficiaries, given their high trade openness and considerable exposure.”

As for the Philippines, DBS said a slowdown in exports should ease but added that a sharp recovery would be hampered by slower growth in the United States, Europe and China.

Domestic inflation, meanwhile, is expected to slow to 3.3 percent this year — within the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 4.0-percent target — and allow for rate hike in the second half of the year.

“Key risks to our call stem from supply-side shocks especially in food and energy prices,” DBS said.

The central bank’s policy rate currently stands at 6.5 percent, the highest since 2007, following 450 basis points of rate hikes beginning May 22.

While household spending held up last year, high interest rates were noted to have weighed on consumer loans, with bank credit growth having grown at the slowest pace in two years in September.

Orders have also boosted manufacturing output but fixed investment plans were said to have fallen post-pandemic.

“The tug-of-war between the need to invigorate growth while keeping fiscal spending under a tight rein will dominate the policy quandary in 2024, as monetary policy levers are unlikely to be loosened in a hurry,” DBS said.

Remittances will help limit the current account deficit to 3.3 percent of GDP this year from 3.9 percent in 2023, the bank also said, higher than the BSP’s forecasts of 2.5 percent and 2.1 percent, respectively.