Maybank: Economy to slow its growth at 5.5% this year

MAYBANK Investment Banking Group (MIBG) on Wednesday said it expects Philippine economic growth, as measured by gross domestic product (GDP), to slow down this year mainly due to global headwinds.

The investment bank pegs the country’s GDP growth this year at 5.5 percent from 7.6 percent last year, with monetary authorities expected to raise rates during their upcoming policy meeting by another 25 basis points. Next year, the country’s economy is forecasted to grow at 6.2 percent.

“But bear in mind that 5.5 percent this year is, we think, [has] got to be one of the fastest economic growth in [the] Asean [Association of Southeast Asian Nations region],” MIBG Senior Economist Zamros Dzulkafli said during a briefing last Wednesday.

Dzulkafli said they expect the Monetary Board of the the Bangko Sentral ng Pilipinas (BSP) to cut rates by 225 basis points by next year to keep up with the US Federal Reserve’s forecasted rate cut.

He said inflation in the country is expected to receive an upward push from the volatile fuel prices given the recent decision by the Organization of Petroleum Exporting Countries and affiliates (OPEC+) to cut global oil production. Dzulkafli said oil prices is still much lower at a comfortable level of about $80 per barrel compared to last year’s average of $100 per barrel.

“We also think that the global food price index to gradually easing. But while it’s easing, we think that it’s going to stay elevated. It’s [going to] be sticky downward,” the executive added. He explained that the largest producer of one of the largest producer of fertilizer, being the Ukraine is still at war with Russia.

“I think there’s going to be disruptions in terms of supply of fertilizer, which I think will continue to push up to keep food prices elevated,” Dzulkafli said.

The MIBG economist added they are also looking at risks from the performance of the Philippine peso.

“The peso this year has been fairly stable. But, of course, the depreciating peso against the US dollar and against trading partners’ [currencies], I think, will put upward pressure on inf lation from the high input cost, especially with the infrastructure [projects pushed] by the government,” Dzulkafli said.

The MIBG also expects private consumption to moderate to 6.4 percent this year from 8.3 percent last year. Government consumption will be steady at 5.2 percent growth, the stock brokerage firm added.

Gross fixed capital formation, meanwhile, will grow by 8.9 percent this year from 10.4 percent last year while exports and imports of goods and services will moderate to 6.8 percent and 9.5 percent respectively.

“So, this is very much related to the expectation of slowing global economic growth for this year,” he said.

Dzulkafli also said the country’s current account deficit may settle at 3.8 percent compared to a 4.6-percent deficit last year.

The government’s fiscal deficit meanwhile may improve to 6 percent from 7.3 percent last year.

“Inflation, we think that’s not much improvement this year. We’re looking at 5.9 percent inflation this year, from 5.8 percent last year. But we expect the headline inflation to improve further next year to 3 percent,” he said.

The peso exchange rate to the dollar may average at P53.75 compared to P55.70 last year, before further improving to P51.50 as the US Fed ends its tightening cycle, the MIBG said in a briefing paper.