GDP growth forecasts upgraded

But Nomura, HSBC still see a slowdown this year

MANILA, Philippines — Japan’s Nomura and British banking giant HSBC raised their economic growth forecasts for the Philippines this year after the country booked its fastest expansion in almost 50 years last year.

Nomura’s Euben Paracuelles and Rangga Cipta said the gross domestic product (GDP) growth forecast for the Philippines has been raised to 4.9 percent from 4.3 percent this year after a stronger-than-expected expansion in the fourth quarter of 2022.

The Philippines maintained its strong momentum with a GDP growth of 7.6 percent last year, slightly faster than the government’s 6.5 to 7.5 percent target, after it exited the pandemic-induced recession with a 5.7 percent expansion in 2021 from a contraction of 9.6 percent in 2020.

This was the fastest growth in 46 years or since the 8.8 percent expansion recorded in 1976.

The Nomura economists said the stronger-than-expected expansion of 7.2 percent in the fourth quarter versus 7.6 percent in the third quarter pointed to continued robust momentum.

However, they said the details suggest this may be difficult to sustain given slowing export growth.

Nomura and HSBC said domestic demand is looking less resilient amid still-high price pressures as the goods trade deficit widened in December.

“Taking into account the Q4 outturn, we raise our 2023 GDP growth forecast to 4.9 percent from 4.3 percent, still slowing sharply from 7.6 percent in 2022.”

Aris Dacanay, economist for ASEAN at HSBC, said the bank also raised its GDP growth forecast to 4.8 percent from 4.4 percent this year and to 5.6 percent from 5.2 percent for next year.

“Due to momentum, we raise our 2023 and 2024 growth forecasts slightly, although we still see growth falling below the trend of 6.5 percent in both years as the lagged effects of inflation and monetary tightening take their toll on the economy, while the positive base effect of the economy’s initial ‘re-opening’ dissipates,” Dacanay said.

With the start of the Year of the Rabbit, the British banking giant thinks the growth drivers in the Philippines are likely to face challenges as the economy goes through a series of internal and external adjustments.

“We believe personal consumption will lose some steam as today’s high inflation environment has already forced households to dip into their savings,” Dacanay said.

He pointed out that household consumption continues to gradually ease whereas investment has lost steam, growing by just 5.9 percent in the fourth quarter from 21.8 percent in the third quarter. This was aggravated by the slowdown in the construction segment as well as the contraction in the agriculture sector.

He said the growth in investments dwindled in the fourth quarter and is likely to further diminish as the Bangko Sentral ng Pilipinas (BSP) is seen to further lift key policy rates to re-anchor inflation expectations.

Like the rest of ASEAN, Dacanay said the Philippine economy is not immune to the global slowdown ahead as shown by the sharp contraction in exports last December.

Both the revised forecasts of Nomura and HSBC are below the lowered six to seven GDP growth target set by the Cabinet-level Development Budget Coordination Committee (DBCC) for 2023.