MANILA – Ayala-led Bank of the Philippine Islands (BPI) has revised upward its growth projection for the Philippine economy this year to 6.3 percent from 5 to 6 percent previously, after noting the higher-than-expected expansion in the first quarter.
The gross domestic product (GDP) rose by 6.4 percent year-on-year in the first quarter this year, higher than the 6.2 percent average projection, with risks coming from the impact of elevated inflation rate and higher interest rates, among others.
In a report released on Thursday, BPI said the lower growth print in the first quarter of this year from 7.1 percent in the last quarter of 2022 and 8 percent last year, is expected because of base effects.
“Now that the GDP is above the pre-pandemic level, growth should revert to its potential level of around 6 percent,” it said.
“We have adjusted our full year GDP forecast to 6.3 percent given the latest print and also the improving outlook for inflation,” it added.
The rate of price increases decelerated for the third month in a row last April to 6.6 percent after hitting a 14-year high of 8.7 percent last January.
The average inflation as of last April stood at 7.9 percent, higher than the government’s 2 to 4 percent target band.
The report said that despite the high inflation rate, consumer spending remains robust, with a growth of 6.3 percent in the first three months this year, higher than the 6.1 percent pre-pandemic average growth.
“This could mean that revenge spending is still present in the economy, possibly offsetting the impact of inflation,” it said.
The BPI said “weaker pressure on the margins of businesses may give them the opportunity to focus more on capital spending.”
“Consumers may be able to spend more on discretionary items,” it added. (PNA)
