The Philippines is ready to leaf through the new chapter on a more vibrant, more optimistic note according to leading independent financial services provider Unicapital Group (Unicapital).
There are opportunities, but not without challenges and risks associated with external factors such as the new US administration’s policies this 2025, it says in its forecast.
OPTIMISTIC GDP FORECAST
Unicapital sees the inflation rate falling below BSP’s 4% target ceiling. It also predicts the GDP growth hitting 6.3%, the highest since 2018, and leading the GDP growth in Southeast Asia, making it one of the fastest-growing economies in the region.
“We are confident that there are opportunities for the Philippines despite the risks. We have seen similar circumstances in the past but with the government stepping up to ensure measures are in place to boost the equity market, everything will fall into place and yield positive results. The government’s signing of the CREATE MORE law is timely in further institutionalizing actions that will enhance corporate profitability,” said Jaime ‘Jimmy’ Martirez, Group CEO & President, Unicapital Group.
Among the new laws expected to improve the overall financial incentives, and ultimately provide a positive boost to the Philippine equity market is the recently signed Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating Economy (CREATE MORE), which is an amendment to the CREATE Act, in a bid to offer a globally competitive tax regime.
During the ceremonial signing, President Ferdinand “Bongbong” Marcos referred to the law as “a resounding testament of our commitment to make the Philippines the destination of choice for investments.”
The law’s incentives, including tax reductions and increased foreign ownership limits, will likely drive both domestic and foreign capital inflows, particularly into sectors poised for growth.
MORE CASH IN POCKETS, MORE POTENTIAL JOBS FOR 2025
Filipinos can let out a sigh of relief as Unicapital sees Filipino households having more cash in their pockets in the coming year with inflation easing and businesses enjoying tax breaks from the newly signed CREATE MORE law. Unicapital is putting its house call on inflation at 3.1%, driven by expectations of lower global oil prices.
Moreover, the CREATE MORE law has a provision to cut corporate income tax (CIT) rate to 20% from 25%, while export-oriented consumer companies are positioned to gain from VAT zero-rating on local purchases and essential services.
This reduction in tax burden will create more allowance for companies to open more jobs and fuel economic activities.
Lower inflation and an increase in the employment rate will ultimately lead to growth in household spending, which is a key growth driver for consumer companies.
What else to expect, come 2025?
EXPECTATIONS UNDER THE NEW US ADMINISTRATION
The investment house believes policy rate cuts should continue, but the pace remains uncertain amid possible inflationary pressures from US protectionist policies under the incoming US government administration. It added that the Philippine peso may weaken against the US dollar as the new administration could lead investors to favor US assets. A downward pressure on oil prices is also expected, driven by several factors including potential trade frictions leading to increased US production and weakened demand.
2025 PSEi INDEX OUTLOOK
Unicapital sees a bottom-up index target of 8,000 for the PSEi, which implies a 14% year-on-year gain from the estimated 7,000 level by the end of 2024.
Meanwhile its EPS growth forecast is derived from our earnings estimates of the index companies. It expects further policy rate easing to boost corporate earnings through a lower cost of capital and increased consumer spending. This is supported by the anticipated further reduction in policy rates by the BSP. However there are downside risks to this including prolonged elevated interest rates and escalation of geopolitical tensions that disrupt the trade supply.
PROPERTY SECTOR: INCREASED OFFICE VACANCY RATE DUE TO EXIT OF POGOs
Unicapital Research sees the overall vacancy rate for the office segment rising to 20.5% primarily due to the banning of POGOs by the end of 2024, but this should start to moderate in 2025 with less new supply in the pipeline.
In the residential segment, Unicapital forecasts inventory levels to decline from 12 months to 11 months of sales as demand recovers and supply slows, as developers take a more cautious stance and temper new launches, but it projects that sales take-up will grow by 9% in 2025, driven by easing mortgage in response to lower policy rates, and attractive payment terms, which should also drive demand.
Unicapital expects outsourcing firms to drive most office demand, especially with the CREATE MORE law allowing up to 50% of employees to work from home without losing tax incentives. This will encourage businesses to establish offices in the country.
With the bane and boon that comes with a stream of factors that dictate the future of the Philippine economy, Unicapital remains committed to its role as a leading independent financial services house by providing expert analysis and financial solutions to its clients.
