Q1 growth seen at slower 6% pace

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) now expects a further slowdown in the country’s economic growth in the first quarter amid elevated inflation and rising interest rates.

BSP Governor Felipe Medalla told reporters on the sidelines of the opening of the exhibit titled “Executive Insights on Systemic Risks: Its Nuances and Challenges”   that the country’s gross domestic product (GDP) likely grew by around six percent in the first quarter.

“Based on our forecast, it will still be around six percent. Lower than last year, but not too much,” Medalla said.

This is slower than the eight percent GDP expansion booked in the first quarter of 2022, as well as the earlier estimate of seven percent given by Medalla during the rate-setting meeting of the BSP Monetary Board on March 23.

The BSP chief said this year’s GDP is likely to settle at the lower end of the six to seven percent target retained by the Cabinet-level Development Budget Coordination Committee (DBCC) on Monday.

On March 23, Medalla was hoping for a faster 6.5-percent GDP expansion for this year.

The Philippines exited the pandemic-induced recession with a GDP growth of 5.7 percent in 2021 after contracting by 9.6 percent in 2020, as the economy stalled due to strict COVID-19 quarantine and lockdown protocols.

With the lifting of mobility restrictions, the growth momentum was sustained as GDP expansion accelerated to 7.6 percent last year, slightly higher than the 6.5 to 7.5 percent target penned by economic managers.

Global economic growth is expected to slow down this year due to stubborn inflation and the aggressive rate hikes delivered by central banks around the world led by the US Federal Reserve to fight inflation.

Since May last year, the BSP has raised key policy rates by 425 basis points to tame inflation and stabilize the peso. This brought the overnight reverse repurchase rate to a 16-year high of 6.25 percent from an all-time low of two percent.

Medalla said  a six percent GDP expansion is still strong despite the aggressive rate hikes delivered by the Monetary Board.

He said even multilateral lenders are expecting a slower GDP growth for the Philippines.

IMF, for one, raised its GDP growth forecast for the country to six percent from five percent this year, but lowered next year’s projection to 5.8 percent from six percent, both below last year’s 7.6 percent expansion.

ADB, on the other hand, sees a GDP expansion of six percent for this year and 6.2 percent for next year.

The Philippine Statistics Authority (PSA) is set to announce the GDP figures on May 11.