MANILA - The Philippine economy is “more likely to be better” next year compared to this year, an economist said on Thursday.

RCBC Chief Economist Michael Ricafort said inflation is expected to further ease next year while interest rates are also likely to go down, both of which will support economic growth.

“Headline inflation would slow down back to the target of the central bank,” Ricafort said.

The Bangko Sentral may also begin cutting Interest rates next year, in step with the US Federal Reserve, he said.

“Maganda ‘yong tsansa na i-match locally. Kaya ‘pag magcut ng interest rates, magandang balita ‘yan sa mga borrowers natin,” Ricafort said.

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He noted that to fight inflation, the BSP raised its benchmark rate by 450 basis points, from a historic low of 2 percent during the pandemic to 6.5 percent in just a year.

But with inflation easing, there will be room for the BSP to cut rates, which can help consumption and investments.

Inflation in November eased to 4.1 percent.

“Mabawasan man lang ng 100-150 basis points, makakatulong din ‘yon so gaganda lalo ang negosyo. Magpi-pick up lalo ang investments, dadami ang trabaho,” Ricafort said.

The Bangko Sentral ng Pilipinas, in its recent Monetary Policy meeting last Dec. 14, has kept the country's interest rate steady at 6.5 percent.

BSP Gov. Eli Remolona said an interest rate cut is unlikely while inflation remains above target. But both the government and private sector analysts expect inflation to settle back within target in 2024.

Managing the El Nino phenomenon’s effect on agriculture, especially on rice production will also be a key to keep inflation within the target range, Ricafort said.

• Bangko Sentral chief says rate cuts unlikely until inflation falls within target
• Inflation slows to 4.1 percent in November

The Department of Finance also said falling oil prices, robust public spending, and structural reforms will drive growth in 2024.

GDP expanded by 5.5 percent in the first three quarters of the year. For the country to hit the government’s target of at least 6 percent growth for 2023, GDP needs to grow at least 7.2 percent in the fourth quarter.

The Development Budget Coordination Committee earlier narrowed its 2024 growth target to 6.5 to 7.5 percent from 6.5 to 8 percent.

- Report from Lady Vicencio, ABS-CBN News