FITCH SOLUTIONS Country Risk and Industry Research said it left unchanged its Philippine economic growth forecast for this year at 6.5%, as the economy gains “further traction” with easing quarantine restrictions.
The decision to maintain the Philippines’ growth outlook was accompanied by a downgraded forecast for the Asia-Pacific overall.
In a webinar on Tuesday, Fitch Solutions cited the loosening of the quarantine and the impetus provided by government spending.
The Fitch view is lower than Development Budget Coordination Committee’s target of 7-9% for this year.
The growth forecast for the Asia-Pacific was cut to 4.7% from 4.9% previously as fallout from the Russia-Ukraine war widens.
The easing of quarantine rules in the Philippines “should offset the drag caused by tighter monetary conditions as well as higher commodity prices,” according to Raphael Mok, Fitch Solutions head of Asia Country Risk.
“Improving vaccination coverage will also allow the economy to normalize at a more sustained pace and reduce the likelihood of another destructive lockdown,” he added.
Mobility levels in March have matched their pre-pandemic baseline levels, Mr. Mok noted.
As of April 3, the Department of Health reported 66.13 million fully vaccinated individuals, for a coverage rate of 73.5% of the target population.
Metro Manila and nearby areas are to remain under Alert Level 1, the least restrictive quarantine setting, until April 15.
“On the fiscal side, the government needs to put off any plans for fiscal consolidation (if it) aims to achieve its growth target of 7%-9% for 2022,” Mr. Mok said.
“As a result, the BSP (Bangko Sentral ng Pilipinas) is trying to stay as accommodative as it can for as long as possible although we expect the central bank to hike its rates by 75 basis points over the course of 2022,” he said.
The central bank kept its key rate untouched for an 11th straight meeting in March.
Last week, the central bank governor said the BSP is looking to end its accommodative policy by the second half. Governor Benjamin E. Diokno also signaled that policy rates could rise to 2.75% by 2023.
“Rising commodity prices will have a significant impact on the Philippines, given that the Philippines is a consumption-driven economy, which informs our below-consensus view,” Mr. Mok said.
The Philippine Statistics Authority reported on Tuesday that inflation picked up to a six-month high of 4% last month due to soaring fuel and food prices.
The statistics agency will report first-quarter gross domestic product data on May 12. — Ana Olivia A. Tirona
