MANILA -- A subsidiary of Fitch Solutions on Tuesday said it was upgrading its growth outlook for the Philippines.

BMI revised its full year growth forecast for the Philippines to 5.7 percent after the gross domestic product expanded by 5.9 percent in the third quarter of 2023.

The July to September GDP growth was higher than the 4.8 percent median forecast in a survey of analysts done by ABS-CBN.

• Philippine economy grows 5.9 percent in third quarter of 2023

The company cut its growth outlook for the Philippines to 5.3 percent in August.

• Fitch subsidiary slashes 2023 PH economic outlook

BMI said the economy would gradually grow over the next few quarters as household spending picks up.

"We continue to expect inflationary pressures to recede over the coming months. Our base forecast is for headline inflation to reach 4.7 percent by
end-2023 before settling within the Bangko Sentral ng Pilipinas’ (BSP) target range of 2.0-4.0 percent in 2024," BMI said.

The Fitch Solutions unit, however, said that the government's target range of 6.5-8.0 percent would be hard to achieve, as high interest rates kept a cap on investment activity.

"Our current expectation is for the benchmark policy rate to be raised by an additional 25 basis points (bps) in the upcoming November meeting due to concerns over price stability," BMI said.

The company noted that the BSP could cut rates in the second half of 2024 in lockstep with the United States Federal Reserve.

BMI added that weak global growth would affect the Philippine economy.

"Against the backdrop of weak global growth, demand for Philippine goods and services looks set to remain lackluster," it said.

BMI said the global economy might only expand 2.1 percent in 2024. On top of this, US and China , which account for about 30 percent of Philippine total merchandise exports, will see their economies slow down next year.

"This makes it exceedingly difficult for Philippine trade to stage a turnaround next year," BMI said.

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