ANZ raises PH growth forecast to 6.7%

In light of the recovery in the first three months of the year, Australia’s ANZ Research raised its Philippine economic growth forecast for 2022, but also warned of widening external imbalances and rising inflationary pressures.

The research firm has calculated that the country’s gross domestic product (GDP) will grow by 6.7% this year, faster than its earlier forecast of 6.5% and actual GDP growth of 5.7% in 2021. to the 8 percent growth target set for this year by the Interministerial Development Budget Coordination Committee. It highlights that first-quarter GDP growth has returned to a pre-pandemic level of 8.3 percent, indicating that domestic demand is showing resilience amid rising price pressures.

“In the near term, improved labor market conditions, solid peso remittances (+11.6% yoy in April) and minimum wage increases are likely to offset the impact of higher prices.”

Consumer confidence improved slightly to 30.4 in the second quarter from 23.6 in the first quarter, ANZ Research also notes. Other high-frequency data, such as consumer credit growth in April, which increased 6.7% year-on-year, also confirmed the strength of private consumption.

It says that as the economy continues to open up, commercial activity has also picked up. Loans for manufacturing operations rose 10.3% year-on-year in April, business confidence has risen sharply, and capacity utilization is returning to pre-pandemic levels.

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However, the research firm warned that “while further improvement is likely in the near term, growth prospects for the second half of 2022 and beyond have become more challenging amid growing external imbalances and a rapidly deteriorating domestic inflation outlook. . “

It said that as the support wanes, the upside momentum could be gradually eroded. More importantly, rising inflation will force consumers to devote more of their budget to spending on essentials such as food, fuel and utilities.

ANZ Research noted that Filipino households are particularly susceptible to changes in global food and energy prices in the absence of effective fiscal measures to reduce inflation pass-through.

He stressed that “the hardest hit sectors” including utility vehicle operators and agricultural businesses are the only ones eligible for fuel subsidies, discounts and vouchers.

“We also believe that narrowing operating margins due to enterprises’ inability to fully pass on higher production costs to end consumers will reduce corporate investment.”