NextGen Day

The robust domestic output for 2023 is anticipated to be dampened by increases in the Bangko Sentral ng Pilipinas’ (BSP) key policy rates, with an executive of HSBC predicting a 4.4 percent expansion this year.

James Cheo, chief investment officer for Southeast Asia, Global Private Banking, and Wealth at HSBC, stated in a virtual briefing on Thursday that private consumption helped the domestic economy rebound strongly last year, but that this is now being constrained by monetary tightening intended to tame the high inflation rate.

According to him, investments, increased government spending on infrastructure, and increased mobility as a result of the restart of in-person education are additional factors that contributed to the GDP’s growth last year.

According to Cheo, as monetary tightening drags on domestic demand and the reopening boost fades, the country’s economy would drop and the recovery will be more sluggish in 2023.

Gross domestic product (GDP) data as of the third quarter of last year showed growth to have increased by 7.76 percent, above the government’s forecast of 6.5 to 7.5 percent growth.

As part of efforts to combat the high inflation rate, the BSP’s key rates were increased by 350 basis points between May and December of last year after reaching a record low of 2 percent in 2020.

Due to greater yearly rises in goods and energy costs, the domestic rate of price increases increased even more in December of last year, reaching 8.1 percent, the highest level since November 2008.

Given the high inflation rate, Cheo predicted that “household consumption in 2023 will probably be reduced.”

According to him, growth in 2023 will be supported by “strong employment, tourism revival, rising production, retail sales, and governmental investment.”

Cheo predicts that the BSP will raise rates three times in a row by 25 basis points this year, pausing at a rate of 6.25 percent by the second quarter of 2023 and holding steady until at least the second half of 2024.

Given the peaking of the strength of the US dollar, Cheo predicts that the peso will end this year at 56.5 to the US dollar.

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