The Maybank Investment Banking Group on Wednesday projected a slowdown in economic activities across the Philippines this year, with output growth measured as the gross domestic product (GDP) averaging only 5.5 percent.
This compares with headline expansion averaging 7.6 percent last year as the economy reopened and mobility restrictions were lifted.
Maybank’s forecast considered the policy stance of the Bangko Sentral ng Pilipinas seen to raise yet again the rate at which it borrows from or lends to banks by another 25 basis points at the upcoming policy rate-setting meeting next month.
The $394 billion southeast Asian economy is seen expanding only 6.2 percent next year.
“But bear in mind that at 5.5 percent this year we think that’s got to be one of the fastest economic growth in the ASEAN,” Zamros Dzulkafli, Maybank senior economist, said.
According to him, the BSP will likely cut the policy rates by 225 basis points in keeping with the US Federal Reserve’s growth-boosting drive.
He also said volatile fuel prices will likely push inflation higher this year given the recent cut in global oil production by the Organization of Petroleum Exporting Countries (OPEC) and its affiliates no matter that oil prices remain at a comfortable level at this point of about $80 a barrel compared to last year’s average of $100 a barrel.
“We also think that the global food price index to gradually ease. But while it’s easing, we think that it’s going to stay elevated. It’s going to be sticky downward as they’re still . . . I mean, the largest producer oo one of the largest producers of fertilizers, being the Ukraine and Russia, are still at war. I think there’s going to be disruptions in terms of supply of fertilizer, which I think will continue to push up to keep food prices elevated,” he said.
He likewise noted the eroded value of the Philippine peso whose fairly stable exchange rate at the moment “I think, will put upward pressure on inflation from the high input cost, especially with the infrastructure push by the government.”
Maybank projects private consumption to moderate to 6.4 percent from 8.3 percent last year.
Government consumption will likely be steady at 5.2 percent.
Gross fixed capital formation, meanwhile, will grow by 8.9 percent this year from 10.4 percent last year, while exports and imports of goods and services will moderate to 6.8 percent and 9.5 percent respectively.
“So, this is very much related to the expectation of slowing global economic growth for this year,” he said.
Dzulkafli also said the current account deficit will likely ease to 3.8 percent compared to 4.6 percent last year and that the fiscal imbalance should improve to 6 percent from 7.3 percent last year.
“Inflation, we think, there’s not much improvement this year. We’re looking at 5.9 percent inflation from 5.8 percent last year. But we expect the headline inflation to improve further next year to 3 percent,” he said.
He views the exchange rate averaging higher to P53.75 per dollar compared to P55.70 last year, further improving to P51.50 as the US Fed end its tightening cycle.
