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Citi keeps Philippine growth forecasts despite Q1 slump
MANILA, Philippines — Global banking giant Citi is retaining its economic growth forecasts for the Philippines even as the recession extended into the first quarter.
Nalin Chutchotitham, economist for the Philippines at Citi, said the bank has retained its 4.9 percent gross domestic product (GDP) growth forecast for 2021 and 6.8 percent expansion for 2022.
“While first quarter GDP came in below our earlier expectation, the faster reopening and acceleration of vaccination could help to improve economic activities in late second quarter and second half,” Chutchotitham said.
The Philippine economy shrank by a record 9.6 percent last year, ending 21 years of growth as businesses stalled when the government imposed strict lockdown measures to slow the spread of COVID-19 infections.
“The return to strict pandemic restrictions at end-March hurt activities in the capital and nearby areas,” Chutchotitham said.
The Citi economist expects Metro Manila – which accounts for 36 percent of GDP – to remain under Level 3 or modified enhanced community quarantine from the middle of April through June.
“But the lockdown status in Manila and a few other high-risk areas were relaxed to the general community quarantine from May 15th to 31st. This effectively brings them close to Jan-Feb period, with about 20 percent indoor dining allowed, but most entertainment venues still closed,” Chutchotitham said.
Chutchotitham said vaccination progress has been relatively slow but would likely pick up after new orders arrive.
Meanwhile, Citi expects the Bangko Sentral ng Pilipinas (BSP) to keep an accommodative stance by keeping the benchmark interest rate at an all-time low of two percent until next year to help the economy recover from the recession.
“The policy rate is expected to remain at two percent until early next year, at least. Demand-pulled inflation should stay subdued and we also expect the BSP to look through the supply-side risks for now in favor of supporting economic recovery.
Citi sees inflation averaging 4.2 percent this year, exceeding the BSP’s two to four percent target, before easing to 2.5 percent next year. Inflation averaged 4.5 percent from January to April this year.
Source: https://www.philstar.com/business/2021/05/28/2101252/citi-keeps-philippine-growth-forecasts-despite-q1-slump