MUFG sees Philippines growing by up to 8% in 2022

MANILA, Philippines — The Philippines may post a faster gross domestic product (GDP) growth of 7.5 to eight percent this year after recording a stronger-than-expected expansion in the third quarter, according to MUFG Bank Ltd.

In a virtual media briefing, MUFG senior currency analyst Jeff Ng said the latest projection was due to the higher-than-expected 7.6 percent expansion registered in the third quarter.

“Given the strong numbers that we’ve seen in the (past) quarter, where the quarter-on-quarter growth was very high, as I’ve already mentioned you know growth could really wedge between 7.5 and eight percent for the rest of the whole year. Assuming there’s no significant material downside risk that immediately occur in the Philippines,” Ng said.

The Philippines emerged from the pandemic-induced recession with a GDP growth of 5.7 percent last year, reversing the 9.6 percent contraction in 2020.

With the further reopening of the economy, the momentum was sustained as the GDP expanded by 7.7 percent from January to September, slightly higher than the 6.5 to 7.5 percent target of the Cabinet-level Development Budget Coordination Committee (DBCC).

The latest projection of MUFG is higher than the previous outlook of 6.7 percent growth for this year.

“But I think if you ask me where the balance of risks, I think growth would likely be 7.5 to eight percent for the rest of the year. And there’s also some upside risks to growth next year,” Ng said.

For 2023, MUFG sees the GDP expansion slowing down to six percent, below  the government target of 6.5 to eight percent.

The Japanese bank sees inflation accelerating to 5.5 percent this year, exceeding the two to four percent target range set by the Bangko Sentral ng Pilipinas (BSP).

Inflation, Ng said, may ease and retur to within the BSP target at 3.9 percent by next year.

To tame inflation and stabilize the peso, the BSP   has raised its key policy rates by 225 basis points that brought the benchmark rate to 4.25 percent from an all-time low of two percent.

The BSP is widely expected to deliver another huge 75-basis point hike today as the central bank has committed to match the rate increases delivered by the US Federal Reserve to maintain the interest rate differential at 100 basis points.

Ng sees the BSP hiking rates by 75 basis points this month and by another 50 basis points next month.

Source: https://www.philstar.com/business/2022/11/20/2225013/mufg-sees-philippines-growing-8-2022