StanChart turns bullish on Phl growth prospects

Standard Chartered Bank now expects faster economic growth for the Philippines this year with a double-digit gross domestic product (GDP) expansion in the second quarter amid the continued reopening of the economy from strict COVID-19 quarantine and lockdown protocols.

Jonathan Koh, economist for Asia and the Philippines at StanChart, said in a virtual press briefing that the bank forecasts the Philippines to grow by eight percent this year after emerging from the pandemic-induced recession with a 5.7 percent expansion last year.

The latest forecast is higher than the revised GDP growth target of 6.5 to 7.5 percent set by the Cabinet-level Development

Budget Coordination Committee (DBCC).

“We expect consumer spending and investment to be the key drivers of economic growth for the rest of the year. Downside risks include lingering pandemic risk and weaker external demand due to monetary policy tightening (in response to elevated prices) and geopolitical tensions,” Koh said.

He said the Philippines likely booked a double-digit growth in the second quarter, expanding by 10 percent from 8.3 percent in the first quarter.

He said the Philippines is likely to register a GDP expansion of eight percent in the third quarter and five percent in the fourth quarter.

StanChart said latest activity indicators showed a further improvement in economic activity, while mobility indicators improved to above pre-pandemic levels as of May.

“We expect private consumption to remain a key growth driver for the rest of the year, after contributing 7.5 percentage points to first quarter’s 8.3 percent yearon-year GDP growth. Labor-market conditions continue to improve,” Koh said.

According to the bank, inflation is likely to broaden further, averaging at 5.2 percent this year from 3.9 percent last year as the domestic economy recovers.

Inflation averaged 4.4 percent in the first half of the year after quickening to

6.1 percent in June on rising oil and food prices due to supply disruptions as well as the impact of the Russia-Ukraine war.

As such, Koh said the Bangko Sentral ng Pilipinas (BSP) is likely to further raise interest rates by another 75 basis points, bringing the benchmark rate to four percent, to contain second round effects from rising wages and fare hikes from becoming more entrenched.