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Philippines: GDP growth may fall below 5% in H2
MANILA, Philippines — The Philippines’ average gross domestic product (GDP) growth may drop below five percent in the second half due to higher interest rates, according to Japanese financial giant Nomura.
Nomura economist for ASEAN Euben Paracuelles and analyst Rangga Cipta said the Philippine economy may grow by an average of 4.9 percent in the second half, lower than the six percent expansion in the first half.
Economic growth may drop to 5.6 percent in the second quarter and further to 4.8 percent in the third quarter before picking up slightly to 5.1 percent in the fourth quarter.
“We believe consumer spending growth will continue to moderate, given falling household purchasing power. Public infrastructure spending is likely to improve, given the government’s strong prioritization, but private investment still faces headwinds from sharply higher interest rates,” Paracuelles and Cipta said.
Nomura sees private consumption growth weakening to 4.8 percent in the second quarter and 4.7 percent in the third quarter from 6.3 percent in the first quarter before accelerating to 5.5 percent in the fourth quarter.
On the other hand, government consumption is seen contracting by 1.9 percent in the second quarter, 0.7 percent in the third quarter and 6.5 percent in the fourth quarter after expanding by 6.2 percent in the first quarter.
The Japanese financial giant also sees exports of goods and services contracting by 3.7 percent in the second quarter and 1.8 percent in the third quarter before inching up by 0.3 percent in the fourth quarter.
According to Nomura, weakening export growth would likely continue, due to the expected recession in the US starting in the third quarter.
It also expects imports to shrink by three percent in the second quarter and one percent in the third quarter before bouncing back with an 8.3-percent increase in the fourth quarter.
Due to the impact of elevated inflation and higher interest rate on consumer spending, the country’s GDP growth slowed to 6.4 percent in the first quarter of the year from 7.1 percent in the fourth quarter and eight percent in the first quarter of 2022.
The Cabinet-level Development Budget Coordination Committee earlier decided to retain its GDP growth target of six to seven percent this year.
Nomura sees the GDP growth of the Philippines falling to 5.5 percent this year.
“We continue to forecast a slowing of GDP growth to 5.5 percent year-on-year in 2023 from 7.6 percent in 2022, below the official six to seven percent range,” Paracuelles and Cipta said.
After exiting the pandemic-induced recession with a GDP growth of 5.7 percent in 2021, the Philippines sustained its economic rebound with a 7.6-percent expansion last year amid the full reopening of the economy after the strict COVID quarantine and lockdown protocols were lifted.
The country slipped into recession as GDP shrank by 9.6 percent in 2020 after the economy stalled due to the strictest and longest lockdown in the world to slow the spread of COVID-19 infections.
Nomura sees the Bangko Sentral ng Pilipinas keeping the benchmark interest rate steady at a 16-year high of 6.25 percent this year to help bring back inflation to within the central bank’s two to four percent target range.
Inflation still averaged 7.5 percent in the first five months despite easing to a 12-month low of 6.1 percent in May from 6.6 percent in April.
Source: https://www.philstar.com/business/2023/06/13/2273363/gdp-growth-may-fall-below-5-h2