Foreign think tank raises Philippines GDP growth forecast

MANILA, Philippines — FocusEconomics has raised the gross domestic product (GDP) growth forecast for the Philippines to 6.9 percent this year, from an earlier 6.7 percent estimate, to remain the fastest growing economy in Southeast Asia.

The Barcelona-based think tank said it expects the economic momentum to be carried over by the faster-than-anticipated 8.3 percent growth in the first  quarter, from a 7.8 percent growth in the fourth quarter.

“GDP is set to grow at the fastest pace in ASEAN this year. Support will come from reduced COVID-19 restrictions, expansionary fiscal and monetary stances, and the government’s Build Build Build infrastructure program. Key factors to watch include fiscal and external imbalances, and fiscal decentralization reforms,” FocusEconomics said.

Despite the upgrade, the projected GDP expansion remains slower than the seven to eight percent growth target set by the Cabinet-level Development Budget Coordination Committee (DBCC) for this year.

Prior to the stronger-than-expected expansion in the first quarter, the Philippines exited the pandemic-induced recession with a GDP growth of 5.7 percent last year, reversing the 9.6 percent contraction in 2020 due to the impact of the COVID-19 quarantine and lockdown protocols on the economy.

“The loosening of COVID-19 restrictions at the end of the quarter supported private consumption. Turning to Q2, the growth rate is likely to remain one of the fastest in the region,” it said.

According to FocusEconomics, private spending will continue to be boosted by loosened COVID-19 restrictions.

It also noted that the manufacturing purchasing managers index (PMI) rose at the fastest rate in nearly five years in April.

“That said, rising inflation will be hampering consumer spending, while the pre-election spending ban will have dampened public expenditure,” the think tank said.

For 2023, FocusEconomics retained its economic growth forecast at 6.1 percent.

Inflation averaged 4.1 percent in the first five months and breached the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP) after quickening to 5.4 percent in May from 4.9 percent in April.

After delivering back-to-back rate hikes last June 23, the central bank’s Monetary Board raised its inflation forecasts to five percent instead of 4.6 percent for this year and to 4.2 percent instead of 3.9 percent for next year.

After starting its interest rate liftoff last May 19 with a 25-basis point rate increase, the BSP raised anew its key policy rates by another 25 bps last Thursday to curb rising inflationary pressures.