BULLISH OUTLOOK. AMRO chief economist Hoe Ee Khor said the Philippine economy will likely grow by 5.9 percent this year, slower than the entity’s earlier forecast of 6.2 percent. Khor, in a briefing on Wednesday (Oct. 4, 2023) noted, however, that AMRO is still optimistic about the country's growth prospects. (Photo from AMRO's website)
MANILA – The ASEAN+3 Macroeconomic Research Office (AMRO) remains bullish on the Philippines' economic growth prospects despite a projected growth slowdown to 5.9 percent this 2023.
"For the Philippines, I think the second quarter is weaker than we had expected. But we are still quite bullish on the Philippines. Our forecast will be 5.9 (percent growth for 2023)," AMRO chief economist Hoe Ee Khor said in a virtual briefing during the release of the quarterly update of AMRO's ASEAN+3 Regional Economic Outlook (AREO 2023) on Wednesday.
The Philippine economy grew by 4.3 percent in the second quarter of the year, down from the previous quarter’s 6.4 percent. This brought the year-to-date economic expansion to 5.3 percent.
AMRO's latest growth projection for the domestic economy is lower than its 6.2 percent earlier forecast for this year.
If realized, however, Philippine economic growth will be the highest in the region.
"The Philippines surprised us in the last two years because domestic demand is quite strong and holding up quite well despite the increase in interest rates. And we think this will continue," Khor said.
He noted that domestic demand is supported by remittance inflows.
The services sector, he said, "is also doing quite well" and more foreign tourist arrivals would further boost growth.
Khor, however, said the elevated inflation would be a drag on growth if it continues to pick up.
Headline inflation accelerated to 5.3 percent in August from 4.7 percent in July, the sixth consecutive month of lower rates after it hit a 40-year high of 8.7 in January.
The government’s inflation target until 2025 is a range of 2 percent to 4 percent.
"Inflation is coming off although because of recent increase in food prices, headline inflation picked up a bit. That's going to be a drag on growth going forward, if inflation continues to pick up," he said.
Khor said headline inflation would likely average at 5.5 percent this year.
"We need to see going forward how bad El Niño is, if it gets worse. Then, I think the food prices will go up everywhere, not just in the Philippines, but in the rest of the region," he said.
For 2024, AMRO expects the Philippine economy to grow by 6.5 percent while inflation is projected to settle at 3.8 percent.
"The trend is for inflation to continue to come down, although food prices may pick up so the core inflation may actually come down faster now, compared to headline inflation. But we still expect inflation next year to be lower than this year… so that will be below, within the inflation target band of the central bank," Khor said.
Due to the high inflation rate this year, the Bangko Sentral ng Pilipinas (BSP) will likely keep rates higher, he said.
"And he (BSP Governor Eli Remolona Jr.) has not ruled out the (rate) increase if necessary. So, I think it's important for central banks in the region to be clear in the objective to bring down inflation," he said.
Last month, the BSP’s Monetary Board maintained the central bank’s key rates, with the target reverse repurchase (RRP) rate at 6.25 percent. (PNA)
