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Standard Chartered projects a 5.3% PH GDP in 2023.
The Philippine economy is forecast to grow by 5.3 percent this year, but external uncertainties are predicted to slow that growth.
Standard Chartered economist for Asia Jonathan Koh stated in a video briefing on Tuesday that the high inflation rate and base effects of the previous year’s strong growth are also considered as considerations in their prediction of economic growth.
However, he added, “the 5.3 percent GDP (gross domestic product) in 2023 will still be one of the highest in Asia.
Even with a drop to 7.2 percent in the final quarter from the preceding three months’ 7.6 percent growth, the domestic economy nonetheless expanded by 7.6 percent last year. This slowdown was mostly caused by an increase in inflation.
The growth exceeds the 6.5 to 7.5 percent growth forecast made by the government.
Standard Chartered anticipates inflation will average 4.8 percent this year, down from 5.8 percent last year but still higher than the government’s target range of 2 to 4 percent.
The bank expects the Philippines’ GDP to grow by 6% and its inflation rate to be 3.1% in 2024.
According to Koh, given the trajectory of oil prices on the global market, inflation is predicted to slow down.
However, he noted that since price rises are predicted to continue at a high rate, this may affect consumers’ ability to spend, which would explain the lower growth forecast.
The improvement in domestic work conditions, according to Koh, is considered a way to counteract this problem. Koh also emphasized the need for additional high-quality occupations to boost household spending.
The Bangko Sentral ng Pilipinas (BSP) is anticipated to raise its benchmark interest rates by an extra 50 basis points in the first quarter of the year, maintain them until the third quarter, and then reduce them by 50 basis points in the fourth quarter due to the high inflation rate.
Koh claimed that a looser monetary policy by the end of the year is necessary to assist the expansion of the domestic economy.
While the economy is still recovering from the pandemic, according to him, the output is still not as strong as it was in 2018–2019.
While adding that “of course, that would depend on inflation,” he said, “I don’t see BSP keeping rates in the restrictive zone, even if growth rebound is a bit fledgling.”
The BSP is anticipated to reduce banks’ reserve requirement ratio (RRR) by the second quarter of this year in addition to the policy rates.
The RRR for large banks, which represents the proportion of deposits and other liquid assets that banks must maintain, was last modified in March 2020, when it was decreased by 200 basis points to 12 percent in order to increase liquidity during the pandemic.
This year, the BSP wants to reduce the RRR level in the nation to a single digit.
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