Moody’s Analytics cuts Philippines 2022 target

MANILA, Philippines — Moody’s Analytics slashed its 2022 gross domestic product (GDP) growth estimate for the Philippines back to 6.1 percent from the original target of 6.4 percent on the back of accelerating inflation and policy normalization by global central banks led by the US Federal Reserve.

After raising the country’s GDP growth forecast to 6.4 last month, the research arm of the Moody’s Group lowered the estimate back to 6.1 percent, as the global economy is hindered by rising inflation and higher interest rates as central banks led by the US Fed accelerate their policy normalization.

“Thus, global demand for goods and services from the Philippines will continue to rise, but at a slower pace,” Moody’s Analytics chief Asia Pacific economist Steven Cochrane said.

Cochrane said the economy of China is struggling to maintain its momentum due to weak domestic demand and the policy changes relating to property markets and technology industries.

Additionally, Cochrane said the regional COVID lockdowns add to further downside risk in China, easing demand for goods and services coming from the Philippines.

Furthermore, the economist said inflation is accelerating in the Philippines, as it is throughout the region, more quickly than what was expected a month ago.

“This will reduce consumer spending slightly,” Cochrane said.

According to Cochrane, the Philippine economy continues to recover, with some upside potential for stronger growth depending upon what stimulus measures may be put in place by the next president and Congress.

The greatest uncertainty, Cochrane added, remains how long inflation will remain elevated, and when the Bangko Sentral ng Pilipinas (BSP) would chose to begin its own normalization policies to shift the policy interest rate to a more neutral level.

Economic managers are looking at a faster GDP growth of seven to nine percent this year after the Philippines exited recession with a 5.7 percent expansion last year from a 9.6 percent contraction in 2020.

In its latest Asia Pacific Outlook titled “Economy Hits Rough Water,” Moody’s Analytics said the re-emergence of supply-chain constraints, accelerating inflation, and China’s slowing growth is factors that have brought down the outlook in the region for the rest of 2022.

“The Asia-Pacific economy has hit some rough water driven by multiple crosscurrents. These include COVID-19, China’s housing market, commodity price inflation, and policy normalization,” Moody’s Analytics said.

It added that such crosscurrents would keep the waters choppy in coming months.

“The second half of the year and into next year may be calmer if central banks can clearly signal their intentions for policy normalization and with that begin to tame inflation expectations,” Moody’s Analytics said.