MAYBANK INVESTMENT Banking Group has cut its growth forecast for the Philippines this year, amid growing possibility of a recession in the United States, China and the European Union (EU).
Maybank said on Tuesday it had lowered the Philippines’ gross domestic product (GDP) growth forecast to 6.5% this year, from the 7% projection it gave in January.
The latest forecast is still within the government’s 6.5-7.5% target for the year, and faster than the 5.7% expansion in 2021.
Despite the downgrade, Maybank said the Philippines’ GDP growth would be the second-fastest among Association of Southeast Asian Nations (ASEAN) member countries this year, after Vietnam’s of 6.9. %
“We are seeing an increasing likelihood of a recession due to a range of factors such as the Russian-Ukrainian war which will likely push Europe into recession… China, the US and the EU are the main ASEAN-6 export destinations,” Maybank said. said economist Ju Ye Lee during a webinar on Tuesday.
Ms Lee said a 1% drop in China’s GDP growth “inevitably leads to lower GDP growth for ASEAN”, albeit mainly in Singapore, Thailand and Malaysia.
“But if you look at the impact on the Philippines or Indonesia, they are more domestically oriented economies. The impact will probably be softer,” she said.
Maybank also lowered its 2022 growth projection for ASEAN-6 to 5% from 5.4% previously.
For 2023, the Philippines is expected to grow by 6.2%, slightly below the government’s target of 6.5-8%. This figure is also higher than the average GDP growth of 4.6% for ASEAN-6 expected in 2023.
Meanwhile, Maybank raised its average inflation forecast for the Philippines to 5.3% from 2.8% in January, as it expects inflation to peak in the third quarter.
Inflation hit a nearly four-year high of 6.1% in June, the third month in a row that it has settled above the BSP’s target range of 2-4%. Year-to-date inflation has been running at 4.4%, still below the BSP average of 5% inflation forecast.
“We think that inflation will likely peak in the third quarter as there are signs of easing in commodity prices, as well as easing supply chain disruptions,” Ms. Lee said.
“But we don’t expectflfall whereff rapidly. The top inflation is likely to remain for some time because supply disruptions, while easing, have not improved back to pre-pandemic levels.
If realized, inflin the Philippines will be the third highest in the ASEAN region, next to 6.3% for Thailand and 5.5% for Singapore.
Maybank said he expects Philippinefldrops to 3.9% in 2023, although it is still the second highest in ASEAN after Malaysia’s 4.1%.
He noted food inflation in ASEAN stood at 6.5% in June, still a modest level compared to the European Union (10%) and the United States (9.7%).
The Philippines, a net food importer, remains below the average at 6%.
“We think food prices have peaked. We are seeing signs of easing, in part because Russia has resumed exports of some of its fertilizers,” Ms Lee said.
“Furthermore, we are seeing the decline in oil prices. Because oil prices and food prices are very strongly correlated, a weakening in global demand would also help ease pressures on some of these food commodities,” she added.
Additionally, Maybank said BSP will be the most aggressive central bank in the ASEAN region as it is expected to raise its benchmark interest rates to a total of 200 basis points (bps) by the end of the year. end of the year.
“They will likely accelerate interest rate hikes this year and probably keep the policy rate unchanged in 2023, while in the rest of ASEAN we mainly expect a 75 basis point hike in Indonesia, Malaysia, as well as in Thailand,” Ms Lee said.
The BSP has raised its benchmark interest rates by a total of 125 basis points so far this year. The Monetary Board is expected to raise rates again at its next meeting on August 18. Diego Gabriel C.Robles