StanChart turns bullish on Philippines

Lawrence Agcaoili - The Philippine Star

MANILA, Philippines — Standard Chartered Bank expects a faster economic recovery for the Philippines this year, prompting the Bangko Sentral ng Pilipinas (BSP) to hike rates by 150 basis points over the next two years.

Jonathan Koh, economist for Asia and the Philippines at Standard Chartered, said in a virtual press briefing the bank expects gross domestic product (GDP) growth to accelerate to 7.5 percent instead of 6.6 percent this year.

Koh said the robust expansion carries over the country’s exit from the pandemic-induced recession last year.

He said the Philippines was hit badly by the resurgence of COVID infections due to the emergence of the Delta variant but managed to book a stronger recovery in the third quarter last year.

Koh added the Philippines likely booked a slower GDP growth of 6.5 percent in the fourth quarter, bringing the 2021 expansion to 7.1 percent.

According to Standard Chartered, inflation may ease to three percent this year and 2.9 percent next year after accelerating to 4.6 percent in 2021 from 2.5 percent in 2020 due to rising global oil prices and elevated food prices.

Due to the faster economic growth as well as the tightening and tapering off of bond purchases by the US Federal Reserve, Koh has penciled a 50-basis-point rate hike by the BSP in the fourth quarter.

This, according to Koh, would be followed by a series of rate hikes in 2023 with 50 bps in the first quarter, 25 bps in the third quarter, and 25 bps in the fourth quarter.

After slashing rates by 200 basis points during the height of the pandemic in 2020, the Monetary Board managed to maintain an accommodative monetary policy stance by keeping interest rates at record lows for more than a year.

It last tweaked the benchmark interest rate, currently at an all-time low of two percent, in November 2020 when it delivered a 25 bp rate cut.

Since then, it maintained a low interest rate environment to help the recovery from the recession gain more traction.

Divya Devesh, head of foreign exchange research at Standard Chartered, said the peso is seen weakening further to 52.50 to $1 this year from 50.999 to $1 in end-2021.

Standard Chartered sees the Philippines posting a twin deficit with a current account deficit of 1.5 percent of GDP this year and a budget shortfall of 7.5 percent of GDP due to rising imports and higher spending for COVID response measures.

The Philippines borrows heavily from both onshore and offshore creditors to plug the government’s widening budget deficit.


  • Latest
  • Trending
Are you sure you want to log out?

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

or sign in with