SUN LIFE Investment Management and Trust Corp. said on Wednesday that economic growth in the second quarter will continue to slow, dragged down by the high year-earlier base.
Sun Life Investment President Michael Gerard D. Enriquez at a virtual briefing said only that projected gross domestic product (GDP) growth will average 5.35% for the year, with a low of 4.30% and a high of 6.40%.
No specific estimate for the second quarter was provided, other than to describe the indicator for the period as slightly lower. First quarter GDP had come in at 6.4%.
Sun Life Investment is factoring in a 63% chance of a US recession, which Mr. Enriquez characterized as “not too severe.”
However, he said even a mild recession might prompt the Federal Reserve to start aggressively cutting rates.
He added that a US recession will likely have an impact on Philippine exports.
Mr. Enriquez said that with inflation stabilizing in the Philippines and in the US, the Bangko Sentral ng Pilipinas (BSP) and the Fed are expected to be less aggressive in tightening policy.
Sun Life Investment projects the consumer price index (CPI) to average 5% in 2023, with the low of 3% and a high of 7%. The official BSP target band is 2-4%.
“Commodity prices are coming off from highs. But weather-related risk (i.e., weak El Niño) is (a factor), but early imports of rice, grains and livestock could mitigate this,” Sun Life Investment said.
The company’s base case has the BSP holding its current rate at 6.25% before cutting as early as in the fourth quarter or early next year.
Mr. Enriquez noted that any cuts are not expected to approach the levels that rates touched before the pandemic.
“They will probably be lower than they are right now but not as low as prior to the pandemic,” Mr. Enriquez said. — Aaron Michael C. Sy
