Maybank cuts Philippine growth forecast

MANILA, Philippines — Malaysian financial giant Maybank has slashed its second half gross domestic product (GDP) growth forecast for the Philippines despite the expansion in the second quarter.

In a virtual forum organized by Maybank Kim Eng, Zamros Dzulkafli, economist at Maybank Investment Bank Bhd, said the bank lowered its GDP growth projection for the Philippines between 7.1 and 7.2 percent from the original target of 7.7 percent for the second semester.

Maybank Kim Eng said the National Capital Region and nearby provinces were placed anew under hard lockdown due to the threat of the Delta and Lambda variants.

“We already downgraded our forecast for the second half of this year. Previously, we we’re looking at 7.7 percent growth for the second half and now we’re looking at 7.1 to 7.2 percent with the ongoing enhanced community quarantine in the NCR and surrounding areas for two weeks,’ Dzulkafli said.

However, the economist pointed out there are risks to the GDP growth forecasts set by Maybank Kim Eng at 5.5 percent for 2021 and seven percent for 2022.

Despite the strong 11.8 percent GDP growth in the second quarter, Dzulkafli said the economy still weakened by 1.3 percent quarter-on-quarter from a growth of 0.7 percent in the previous quarter.

“So this year we’re still operating below pre-pandemic level. And if you look at the trajectory between the pre-and post-COVID-19 recession, we are looking at a 15 percent gap, which means that the scarring effect is that we are losing 15 percent of the economy, which I think is very difficult to gain despite the double digit growth for the economy,” Dzulkafli said.

Maybank Kim Eng sees exports bouncing back with a growth of 8.1 percent for this year and imports expanding by 15.4 percent this year.

With elevated borrowings and lower revenues, the country’s budget deficit is seen widening further to 8.1 percent of GDP this year from 7.6 percent of GDP last year.

Dzulkafli said inflation may accelerate to four percent this year before easing to 2.5 percent next year, allowing the Bangko Sentral ng Pilipinas (BSP) to maintain an accommodative monetary policy to accelerate economic recovery.

For her part, Maybank Kim Eng Philippines research head Jacqui de Jesus said the Philippines’ fundamentals are moving in the right direction as the country is seen reaching herd immunity by the second half of next year.

De Jesus said the Philippine Stock Exchange index (PSEi) may hit 7,650 over the next 12 months as earnings growth is seen at 37 percent for 2021 and 21 percent for 2022.

De Jesus also said the first wave trickle down impact from the deployment of government funds for the 2022 presidential and national elections is expected to  be felt in the second half  followed by the second wave from campaign-related spending next year.

Meanwhile, Moody’s Analytics said the early signs of recovery in the Philippines have proven short-lived as the country recorded a 1.3 percent contraction in seasonally adjusted GDP for the second quarter.

“The quarterly contraction reflects the effects of relatively strict movement controls that were in place for most of the June quarter. The Philippines has struggled to contain COVID-19 cases and the country has been recording high infections through most of 2021,” Moody’s Analytics added.