Philippines: GDP growth forecast revised downward

MANILA, Philippines — Economists following developments in the Philippines have trimmed their growth forecast for this year and next year over concerns on the weak peso and high inflation, according to a survey of think tank Japan Center for Economic Research (JCER).

Results of the quarterly consensus survey on Asian economies conducted by JCER in cooperation with Nikkei Inc. from Sept. 2 to 22 showed the average economic growth projection for the Philippines for this year was revised to 6.5 percent from 6.6 percent last June.

Economists that took part in the JCER survey include Metropolitan Bank and Trust Co. research and business analytics officer Ina Judith Calabio, Philippine Equity Partners Inc. head of research Jojo Gonzales, Nomura Singapore Ltd. chief ASEAN economist Euben Paracuelles, Barclays Bank Singapore regional economist Shreya Sodhani, Union Bank of the Philippines chief economist Ruben Carlo Asuncion, and De La Salle University School of Economics associate dean Mitzie Irene Conchada.

The new projection is at the low end of the government’s gross domestic product (GDP) target of 6.5 to 7.5 percent this year.

After posting a 7.4 percent GDP growth in the second quarter, economists expect the Philippine economy to grow by 6.2 percent in the third quarter and by 4.3 percent in the fourth quarter.

Conchada said “economic growth seems to be sluggish for the country due to inflation woes, weaker exports, and the depreciation of the Philippine peso.”

Economists expect the inflation rate for this year to be at 5.4 percent, up from the previous forecast of 4.9 percent.

This is lower than the Bangko Sentral ng Pilipinas’ average inflation forecast of 5.6 percent for this year.

Inflation averaged 4.9 percent from January to August after easing slightly to 6.3 percent in August from 6.4 percent in July.

“For the remainder of the year, inflation could be more than six percent [due to] the ongoing pass-through effects of costs. The peak would be in September to October when 6.6 percent inflation may persist,” Asuncion said.

While the average growth forecast for the Philippines for this year was revised downward, the projection is the second fastest among the Southeast Asian countries covered in the survey, next to Malaysia, which is expected to grow by 6.9 percent. Other Southeast Asian countries in the survey are Indonesia, Singapore and Thailand.

For next year, the Philippine economic growth rate is expected to slow down, with the average growth forecast at 5.4 percent from 5.6 percent, previously.

This is lower than the government’s target of 6.5 percent to eight percent for next year.

“Critical to the 2023 GDP growth outlook is the 4Q (fourth quarter) 2022 GDP forecast. Households will try to navigate recession risk. It will discourage discretionary (=not essential to daily life) expenditures. If Philippine export performance wanes further, the risk could be larger,” Asuncion said.

For 2024, the average growth projected for the country is at six percent, up from the previous forecast of 5.8 percent.

The projected growth for the Philippines for next year and 2024 are the highest among the Southeast Asian countries in the JCER survey.

For the next 12 months, the top risks to the country’s growth identified in the survey are the peso’s depreciation, rising inflation, and a slowdown in trade triggered by the US-China tensions.

JCER said the peso’s weakening against the US dollar would continue until at least 2023.

The report showed the peso-dollar exchange rate forecast was at P56.80 for this year, P55.90 next year, and P53.80 next year.

Calabio said “high global inflation and expectations of further Fed rate hikes would lend support to the US dollar in the coming months.”

Source: https://www.philstar.com/business/2022/10/05/2214274/gdp-growth-forecast-revised-downward