Strong rise in PH amid problems

The economy is likely to grow by 6-7% this year despite global and domestic challenges, Metrobank Group’s investment banking arm said Wednesday.

“At the beginning of the year, we predicted an acceleration in the growth of the Philippine economy, but so many unexpected events have occurred in the past six months that the strong growth momentum of 8.3 percent in the first quarter of the year has subsided,” Jose Patricio Dumlao. President of First Metro Investment Corp. (FMIC), the report said.

“However, we remain confident that the economy will continue to outperform competitors in the region and grow by 6 [to] 7 percent this year.”

The FMIC forecast is slightly below the government’s target of 6.5% to 7.5% for 2022 (recently lowered from 7% to 8%), and above last year’s actual gross domestic product growth of 5.7%.

It is expected that the main driver of economic development will be constant domestic demand. This includes consumer spending, government spending and investment spending, which rose 11 percent in the first quarter of the year.

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“The country’s fundamental macroeconomic indicators remain strong and we are in a much better economic situation now than during past crises,” Dumlao said, noting that the trade deficit reached a record $43.2 billion in 2021 and could widen. up to $50 billion. this year, or about 70 percent of exports, and that gross international reserves remained high at $106.8 billion, or about nine months of imports.

Inflation is expected to remain high at 5 to 5.2 percent, partly as a result of rising global oil prices, which are affecting domestic prices for oil, food and commodities.

Business process outsourcing revenues, which reached 28 billion pesos in 2021, are projected to rise by at least 6 percent this year, while overseas Filipino workers’ remittances, which rose to 35 billion dollars in 2021, estimated to increase by 3.5-5.5 percent.

As for the peso, the FMIC said it was depreciating as a result of rising US interest rates and a widening trade deficit. The exchange rate is forecast to fluctuate between 54 and 55 pesos to the dollar at the end of the year.

At the same time, interest rates are projected to rise by an average of 100 basis points across the curve as central banks continue to control high inflation, he added.

At a briefing organized by FMIC, Asia Pacific University economist Victor Abola also expressed confidence that economic managers will do everything possible to keep the economy growing.

“The economic team … is actually excellent and unbiased. They will focus on keeping the budget deficit low to ensure faster growth going forward,” he said.

Abola said he did not expect a downgrade, but warned growth would be affected by rising inflation, the protracted conflict between Russia and Ukraine, natural disasters, an overreaction to the ongoing pandemic and rising US interest rates.