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Nomura hikes Philippine GDP growth target
MANILA, Philippines — Japanese investment bank Nomura expects a shallower economic growth dip for the Philippines this year, raising its gross domestic product (GDP) growth forecast to 5.5 percent from the original target of 4.3 percent.
Nomura chief ASEAN economist Euben Paracuelles and analyst Rangga Cipta cited the better-than-expected GDP growth of 7.2 percent in the fourth quarter that brought the full-year 2022 expansion to 7.6 percent, slightly higher than the 6.5 to 7.5 percent target penned by economic managers.
Despite the upward revision, the projected GDP growth for this year is lower than the six to seven percent target set by the Cabinet-level Development Budget Coordination Committee (DBCC).
“Still, our 2023 GDP growth forecast is below the government’s target of six to seven percent, on our view that domestic demand will likely be less resilient than in past global downturns because of persistently high inflation, which hurts consumption spending,” Paracuelles and Cipta said
For 2024, Nomura also raised its GDP growth forecast to 6.3 percent from the original target of six percent.
In a report on the Philippines titled “Shallower Growth Dip,” Nomura also raised its inflation forecast to 5.6 percent from 4.4 percent for 2023 after blowing past expectations to hit a fresh 14-year high of 8.7 percent in January from 8.1 percent in December.
In addition, Nomura said the relatively large upward revisions to its US and China GDP growth forecasts have a material impact on its Philippine growth forecasts.
“A less sharp decline in global growth is helping, but vulnerabilities remain from soaring domestic inflation,” Paracuelles and Cipta said.
Nomura sees the Bangko Sentral ng Pilipinas (BSP) hiking key policy rates by 50 basis points to six percent from 5.50 percent after the Monetary Board raised interest rates by 350 basis points last year to tame inflation and stabilize the peso.
The Japanese investment bank sees a 25-basis-point hike in February and another 25 basis points in March, in line with the softer rate increases delivered by the US Federal Reserve.
“Beyond that, we still expect BSP to reverse course and start cutting its policy rate, but only from the fourth quarter of 2023 instead of the third quarter, given our change in view that the Fed is no longer cutting this year,” Paracuelles and Cipta said.
Nomura sees the end-2023 policy rate at 5.50 percent due to the expected rate cuts, as inflation is seen easing back to the two to four percent target in the fourth quarter and further to 4.50 percent instead of five percent in end 2024.
According to Nomura, the country’s current account deficit may narrow to 4.4 percent of GDP in 2023 and 3.7 percent of GDP in 2024 from about 5.6 percent of GDP last year.
“Our current account deficit forecast pencils in only a slight narrowing this year, given the tech downcycle, the boost in capital goods imports from infrastructure projects and higher food imports by the government in a bid to boost domestic supply,” they said.
In a separate report titled “Postcard from Tokyo,” both Paracuelles and Cipta said the Philippines belongs to a group of Asia’s new rising stars that could lead the global recovery beyond this year.
“The recently launched Philippine Development Plan 2023-28, which is a roadmap to transform the economy over the medium term, sets an ambitious target of 6.5 to eight percent annual GDP growth. The drivers remain consumption and investment spending, including higher construction activity from the roll-out of infrastructure projects, but also new drivers such as mining and manufacturing, and those sectors helped by recent reforms,” they said.
Source: https://www.philstar.com/business/2023/02/14/2244679/nomura-hikes-philippine-gdp-growth-target