DEBT watcher S&P Global Ratings maintained its 2022 Philippine economic growth forecast below the government’s target in light of rising consumer prices.
The country’s gross domestic product (GDP) is projected to grow at 6.5 percent this year, faster than actual GDP growth of 5.7 percent in 2021, but short of the 7-8 percent growth target set for this year. year in the development budget. Coordinating Committee.
Louis Cuis, S&P Global Ratings chief economist for Asia Pacific, said growth in the Philippines picked up significantly in the first quarter, with investment particularly strong as both consumption and exports continued to rise.
“However, our outlook for the next few quarters is more dim, mainly due to the significant impact of high inflation on consumption growth,” he told The Manila Times.
In addition, Kuis stressed that the inflationary situation is forcing Bangko Sentral ng Pilipinas (BSP) to stop monetary policy earlier than expected.
As part of normalizing its monetary policy, the central bank raised its benchmark interest rates by 25 bps in a row in May and June.
Kuijs warned that this would negatively impact the investment recovery, especially in the private sector, and slow growth over the next two years.
“The economy will also receive more limited fiscal support as the focus begins to shift to lower debt-to-GDP levels after the pandemic-related surge,” he added.
The S&P economist continued that while external demand is currently still strong, it could be negatively impacted by China’s lockdowns and inflation’s impact on the growth of major economies.
Kuijs said the slowdown in the domestic economy would also affect imports, so the overall result could be neutral. In addition, a return to a narrower surplus or even a modest current account deficit — a symptom of the pandemic — could be slightly delayed or muted.
“This could ease some of the pressure on the exchange rate as the Fed continues to maintain a strong dollar environment,” he stressed.
Felipe Medalla, managing director of the BSP, has previously expressed optimism that Philippine GDP growth this year will at least meet the government’s bottom line 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 won’t be surprised if GDP growth this year is 7 percent,” he said.
Medalla expects that despite the rise in Covid-19 cases, the second quarter will still see positive GDP growth, albeit at a slower pace than the first quarter.
“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 added.
The head of Bangko Sentral also minimized the impact of rising fuel prices on economic growth, arguing that they would rather raise prices than cut output.
“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.