Philippines: 6% GDP growth projected

• Feb 28, 2023

MANILA, Philippines — The country’s gross domestic product (GDP) may expand by over six percent amid pent-up demand as well as the easing of inflation back to within the two to four percent target range toward the end of the year, according to Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla.

In his speech during the Philippine Economic Briefing organized by the Philippine Chamber of Commerce and Industry (PCCI), Medalla said demand in the country is still strong after booking its fastest economic growth in more than 40 years with the lifting of strict COVID-19 quarantine and lockdown protocols.

After exiting the pandemic-induced recession with a GDP growth of 5.6 percent in 2021 from a  9.6-percent contraction in 2020, the momentum was sustained with a 7.6 percent expansion last year, slightly higher than the 6.5 to 7.5 percent target penned by economic managers.

This came despite the aggressive rate hikes delivered by the BSP that brought the benchmark interest rate to a fresh 16-year high of six percent from an all-time low of two percent to tame inflation that soared to a 14-year high of 8.7 percent in January from 8.1 percent in December.

“Demand is still strong. And when you take a look at it, a policy rate of six (percent) is not very high relative to inflation. Because even assuming that we will hit our target at the end of the year, it’s just two percent,” Medalla told reporters.

The BSP  has so far raised key policy rates by 400 basis points since May last year to fight inflation and stabilize the peso that slumped to an all-time low of 59 to $1 last October.

After quickening to 5.8 percent and exceeding the BSP’s two to four percent target range last year from 3.9 percent in 2021, Medalla is confident that inflation will ease to within the target range either in November or December.

Due to the surprise turnout in January, the BSP raised its inflation forecasts to 6.1 percent from 4.5 percent for 2023 and to 3.1 percent from 2.8 percent for 2024.

“As I keep saying, we believe that we’ve already done enough to put inflation on a target-consistent path. We’re not there yet, but we’re getting there,” he said.

Medalla said pent-up demand continues to drive economic growth amid tighter monetary policy.

He cited the 24.7-percent increase in spending in hotels and restaurants in the fourth quarter of last year, as well as the 31.3 percent jump in car sales in 2022.

Source: https://www.philstar.com/business/2023/02/28/2248065/6-gdp-growth-projected