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Capital Economics trims anew Philippine growth forecast
MANILA, Philippines — London-based Capital Economics further slashed its gross domestic product (GDP) growth forecast for the Philippines this year following a disappointing performance in the first quarter.
In its latest chart book, the think tank said it now expects the Philippines to grow by six percent in 2021, which means the country might reach the lower end of the government’s six to seven percent growth target.
It marked the third time Capital Economics had trimmed its Philippine GDP growth outlook. Its original forecast was an 11 percent growth, only to cut it to 9.5 percent, then 7.5 percent before settling at six percent.
While this falls within the updated government targets, this would still leave the country’s GDP one percentage point below its pre-crisis level by yearend.
The Philippines has remained in recession after the economy contracted for the fifth consecutive quarter amid a resurgence in COVID-19 cases and slow vaccine rollout.
GDP shrank 4.2 percent in the first quarter, falling below the market consensus of a 3.2 percent decline. This is also worse than the 0.7 percent contraction in the same period last year.
“This quarter, tight containment measures have been introduced across much of the country in response to a surge in infections. While new cases have fallen back in recent weeks, they remain elevated,” Capital Economics said.
Mobility in the country is still around 35 percent lower than pre-pandemic levels.
Following the reimposition of quarantine measures last month, the think tank expects GDP to remain in negative territory as it will contract three percent, coming from a record 17 percent contraction in the same period last year.
Meanwhile, Capital Economics said more interest rate cuts should be expected later in the year.
The surge in inflation since January has stopped the Bangko Sentral ng Pilipinas (BSP) from easing further to support the economy in dire need of recovery.
April inflation, however, steadied at 4.5 percent as the uptick in transport and fuel and meat prices was offset by the decline in other food commodities.
“The BSP is becoming less concerned about price pressures. We expect the headline rate to begin falling back by the early second half of the year as food prices fall and the base effects from last year’s slump in global oil prices drop out of the annual comparison,” Capital Economics said.
“This should allow the central bank to cut interest rates by a further 50 basis points in the second half of the year,” it said.
Source: https://www.philstar.com/business/2021/05/28/2101266/capital-economics-trims-anew-philippine-growth-forecast