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MANILA – Attracting more investments will be crucial for the country to sustain its economic growth and hit a gross domestic product (GDP) target of 6 to 7 percent next year, Bank of the Philippine Islands (BPI) lead economist Emilio Neri Jr. said in a briefing Wednesday.
Neri said the share of investments to GDP fell behind consumption, government spending and export revenues, especially since the onset of the coronavirus disease 2019 (Covid-19) pandemic.
“If there is no sharp improvement in investments, which is crucial for growth rates of about 7 percent for the Philippine economy, we will find it very difficult to achieve the original goal of 6 to 7 (percent), and we may have to set them with something like 5 to 6 percent. So, (it is) very crucial to boost investments,” he said.
Data from the Philippine Statistics Authority (PSA) alone showed that approved investments in major investment promotion agencies amounted to PHP449.58 billion in the first three quarters of the year, higher by 28 percent from PHP350.44 billion in the same period in 2021.
The BPI forecasted Philippine GDP for 2023 to settle at 5.6 percent, slower than the estimated 7 percent growth for the full year of 2022.
It projected the Philippine economy will grow by 5.8 percent in 2024.
But Neri said attracting more investments will be more difficult amid the increasing interest rates.
As the country is expected to record high inflation rates next year, he said the Bangko Sentral ng Pilipinas (BSP) is also expected to further implement tightening of monetary policy.
The economist added that the BSP policy rate may peak at 6 percent in the middle of 2023 before implementing rate cuts.
The projected easing of policy rates is expected to be implemented when the United States Federal Reserve System will also introduce rate cuts to counter the foreseen recession in the US.
The BPI projected the BSP policy rate to settle at 5.50 percent this year before easing to 4.75 percent in 2023.
The central bank’s policy rate was at 2 percent in 2020 and 2021.
Headwinds remain
Neri said inflation and the Covid-19 situation will remain an internal risk, while possible recessions in the Euro zone and the US will be the external factors for the country’s economic growth next year.
He also supported the earlier statement of the government that recession in the Philippines is unlikely amid the increasing inflation and policy rate as consumption remains robust.
BPI’s inflation forecast for this year is at 5.8 percent and slowing down to 4.8 percent in 2023, which is higher than the 2.4 percent inflation in 2020 and 3.9 percent in 2021. (PNA)
