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MANILA, Philippines — According to an analyst, government spending and the resurgence of the private sector would help the Philippine economy grow by 6.5 percent this year.

Dr. Hoe Ee Khor, the chief economist of the Asean+3 Macroeconomic Research Office (AMRO), stated in a video briefing that the growth outlook took into account the impact of the additional coronavirus disease 2019 (Covid-19) types on the economy.

“Because the Philippine economy has a big output gap, we expect private spending to rebound quickly once the economy is completely open.” We are optimistic that this year’s growth rate of 6.5 percent will be achieved. “And we estimate another 6.5 percent growth next year,” he added.

The regional macroeconomic monitoring organization’s economic growth prognosis is lower than the government’s 7 percent to 9 percent growth assumption, but it is within the 6 percent to 7 percent target set by economic managers for 2023.

The economy increased by 5.7 percent last year, exceeding the government’s 5.5 percent target.

Meanwhile, according to Khor, the domestic inflation rate has been increasing since last month and is expected to continue for the rest of the year.

Due to higher oil costs, the rate of price rise increased to 4% in the third month of this year.

Inflation had been at 3% for the preceding two months. Inflation in the first quarter of this year averaged 3.4 percent, keeping within the government’s target range of 2 to 4%.

“For the majority of the year, we expect inflation to remain over the target band.” As a result, inflation is mostly driven by rises in fuel and food prices,” he explained.

The domestic economy, according to Khor, continues to have a big output gap since it has not yet recovered from the pandemic.

“Demand is still moderate,” he said, noting that it isn’t “particularly weak.” “On the demand side, we don’t see a lot of growth potential.” As a result, I believe that inflation will fall below, and within, the target band by next year.

Khor dismisses any “immediate need” to raise the Bangko Sentral ng Pilipinas’ (BSP) key policy rates, which were reduced by 200 basis points in 2020 to help the economy cope with the pandemics effects.

“I think the BSP should start thinking about reducing some of the policy stimuli as the economy gains traction,” he added.

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