ANZ cuts Philippines growth forecast

MANILA, Philippines — ANZ Research further slashed its growth forecast for the Philippines to 6.5 percent this year, 6.4 percent next year  and 5.9 percent in 2020.

This is the second time ANZ Research lowered its economic growth forecast for the Philippines.

Just last month, the investment bank reduced the country’s 2018 GDP growth forecast to 6.6 percent from the original forecast of 6.8 percent due to the lower-than-expected expansion in the second quarter.

“In sum, a combination of domestic and external developments is weighing on the region’s growth prospects. Growth in the Philippines should also be impacted albeit more moderately,” ANZ Research said.

Philippine economic growth eased to the slowest level in three years at six percent in the second quarter from the revised 6.6 percent in the first quarter.

This brought to 6.3 percent the GDP growth in the first half, lower than the seven to eight percent target set by economic managers through the Development Budget Coordination Committee.

ANZ Research said the diminishing macro stability in the Philippines and Indonesia has forced a tighter monetary policy that should have a knock-on impact on domestic demand with a lag.

The BSP raised interest rates by 100 basis points so far this year to curb rising inflation and inflationary expectations. It lifted rates by 25 basis points for the first time in more than three years on May 10 followed by 25 basis points on June 20, and 50 basis points – the biggest in 10 years – last Aug. 9.

Economists expect the central bank to raise benchmark rates by another 50 basis points on Sept. 27 as monetary authorities vowed stronger monetary action to address rising inflation.

“The tightening in the Philippines is to address both rising external imbalances and inflation,” ANZ Research said.