PHILIPPINE economic growth will likely fall below target this year but not next year despite local and global headwinds, Malaysia’s Maybank said.
“Growth will continue to be driven by domestic demand, mainly private consumption, supported by a stable labor market, ongoing infrastructure projects, resilient overseas Filipino workers’ remittances and recovery in tourism,” Zamros Dzulkafli, Maybank Investment Banking Group analyst, said in a briefing on Wednesday.
Maybank retained its 2023 Philippine growth forecast at 5.8 percent, which is below the government’s 6.0- to 7.0-percent target, and that for 2024 at 6.5 percent — at the lower end of the 6.5- to 8.0-percent medium-term goal.
Dzulkafli said a global economic slowdown, particularly in the United States and China, extreme weather, and longer-term climate change would dampen growth this year.
“The onset of El Niño and export ban on rice and other food items will push up food prices, and we continue to monitor the risk of higher transportation costs and crude oil prices amid the Middle East conflict,” he added.
Third-quarter growth was a better-than-expected 5.9 percent, accelerating from the disappointing 4.3-percent result three months earlier.
Year-to-date growth, however, remains below target at 5.5 percent, and most analysts expect the full-year goal to be missed. The economy will have to grow by 7.4 percent in the last three months of 2023 to hit a 6.0-percent average.
Maybank also maintained its inflation forecasts for the country, saying that consumer price growth would breach the 2.0- to 4.0-percent target at 6.0 percent this year.
Despite continued upside risks, it expects inflation to fall within the target next year at 3.5 percent.
“Our baseline forecast is monthly headline inflation will be on a gradual downward trend in coming months after reversing the racceleration in Aug-Sept 2023,” Dzulkafli said.
“This is as the rice harvest season as well as steady supply of vegetables and other commodities should keep FNAB (food and nonalcoholic beverage) inflation in check,” he added.
Dzulkaflu expects the government to continue with nonmonetary measures to ensure an adequate supply of food amid factors like the El Niño weather pattern, which is expected to remain until mid-2024.
“The recent trend in headline and core inflation enhanced our view that [the] BSP (Bangko Sentral ng Pilipinas) will keep the interest rate at 6.50 percent during the last monetary policy meeting for the year,” he added.
The August-September rise in inflation prompted the BSP’s policymaking Monetary Board to order an unscheduled 25-basis-point (bps) rate hike in late October. A pause was implemented last month as inflation began easing anew.
The BSP’s 6.50-percent policy rate, the highest since 2007, is the result of rate hikes totaling 450 bps beginning May last year as inflation surged in the wake of Russia’s invasion of Ukraine.