The Philippines’ GDP growth in the third quarter of this year is expected to slow to 5.9 percent to 6.6 percent.
Bangko Sentral ng Pilipinas said in its latest monetary policy report that the country’s GDP growth will stabilize within the revised target of 6.5 to 7.5 percent set by the Cabinet-level Development Budget Coordination Committee.
Rizal Commercial Banking Chief Economist Michael Rycafort. RCBC FILE PHOTO
The risk factors for his 6 percent year-over-year estimate for third-quarter GDP growth include rising inflation and prices caused by Russia-Ukraine War, Michael Rycafort, chief economist at Rizal Commercial Banking Corp., told The Manila Times in an email. It started earlier this year.
Rycafort added that higher interest rates and financing and borrowing costs that were largely caused by aggressive rate hikes by the US Federal Reserve and other central banks to bring down high inflation would also boost economic growth for the third quarter of this year.
In a separate email to The Times, Bank of China chief economist Domini Velazquez attributed the slower growth forecast of 6.6% to the impact of higher prices on consumption.
“We expect consumers to cut back on spending on non-essential goods and services due to persistently high inflation,” Velasquez said.
“Also, spending on expensive items, such as cars and homes, is likely to be deferred, as banks charge higher interest rates on loans,” Velasquez added.
The Bank of China economist said the external outlook is “also weaker”, with exports expected to weaken as the global economy slows.
Meanwhile, Velasquez said imports will increase due to higher commodity prices, and thus a widening trade deficit.
For his part, Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines (UBP), said in a separate email to The Times that he does not expect the economy to fall into recession as he forecasts GDP growth in the fourth quarter of the year. by 5.1 percent.
“UBP staff also estimated the narrowing of the production gap in the second quarter of 2022 (the second quarter of 2022) as the actual peak production [over] Potential GDP is now in the rearview mirror.”
On the other hand, he said the GDP forecast for the fourth quarter of this year is crucial to the 2023 outlook.
“We have lowered [the fourth quarter 2022] GDP growth to 5.1 percent year-on-year which will pave the way for a slower GDP forecast for 2023 of 5.7 percent.”
He made it clear that a global recession (not a severe recession) is imminent, with the US and the Eurozone likely to lead the way.
Asuncion added that the risk to this core growth remains to the downside if export volumes decline further.
Meanwhile, Velasquez expects the story to remain the same for the rest of the year as inflation is likely to continue its upward trend in the fourth quarter.
“However, we hope that the economy will reach the lower end of the government’s full-year target of 6.5 percent,” Velasquez said.