The economy of RN will reach 7% of GDP this year

DESPITE the impact of rising fuel prices on consumer demand, the new central bank chief is optimistic that Philippine gross domestic product (GDP) growth this year will hit at least the lower bound of the government’s target.

“It will be difficult to match 8.3% [economic growth] in the first quarter due to higher base effects. But at the same time, I wouldn’t be surprised if GDP growth is 7 percent this year,” Felipe Medalla, Governor of Bangko Sentral ng Pilipinas, told reporters Wednesday evening.

Philippine Central Bank Governor Felipe Medalla. FILE TMT PHOTO

It should be noted that the government’s growth target for this year has been lowered by the Development Budget Coordinating Committee from the previous target of 7-9 percent to 7-8 percent.

Medalla said the second quarter will still see positive GDP growth, albeit slower than the previous three months, as people’s mobility continues to improve despite rising Covid-19 cases.

“If you look, for example, at shopping malls. People are actually almost not afraid of Covid. I’m not a medical expert, but I think if the rise in cases doesn’t clog hospitals, then we’ll be fine. “, he stressed.

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Medalla also cited the central bank as an illustration, where Covid-19 cases have increased but no hospitalizations have been reported.

“But, of course, this is too small a sample…” he continued, “but if what we see is what is everywhere, then high demand will continue and we will have a very good 2022.”

The head of Bangko Sentral also downplayed the impact of higher fuel prices on economic growth, saying they would rather raise prices than cut production.

“For example, you will still drive to work, right? But you don’t go out at night. That is, in other words, it does not harm production so much as it harms pockets.

He said another way to reduce demand is if households pay more for fuel, potentially spending less on other things.

Sun Life raised its GDP forecast

Accordingly, Sun Life Investment Management and Trust Corp. (SLIMTC) has raised its forecast for economic growth in the Philippines this year as it sees improved mobility as an important driver of growth.

“Our projected GDP growth is actually higher than other Asian and developed markets. And this year, we’re expecting about 8.2% on a full-year average,” said Mike Henriquez, president and chief investment officer of SLIMTC. , at a briefing on Thursday.

He argued that the economy will continue to grow despite oil and inflation concerns if mobility restrictions continue to improve and the number of Covid-19 cases does not really accelerate.

Henriquez added that while SLIMTC is optimistic about the Philippine economy, it is nonetheless cautious about some of the downside risks.

Those risks, he said, include continued tensions between Russia and Ukraine, which could keep commodity prices high for a longer period of time and lead to supply shortages.

The head of SLIMTC also warned of monetary policy that could be perceived as “inadequate” and lead to a negative currency pass-through; depreciation of the peso, which can lead to an outflow of funds abroad; and a new severe variant of Covid-19 that could lead to tighter mobility restrictions.