MANILA – Government expenditures and recovery of the private sector will help drive the Philippine economy to grow by 6.5 percent this year, an analyst said.
Asean+3 Macroeconomic Research Office (AMRO) chief economist, Dr. Hoe Ee Khor, said in a virtual briefing that the growth outlook considered the impact of the additional coronavirus disease 2019 (COVID-19) variants on the economy.
“The Philippine economy has really seen a large output gap so we expect that private spending will bounce back very rapidly once the economy opens fully. We are quite confident that this six and a half percent growth can be achieved this year. And we expect growth of another 6.5 percent next year,” he said.
The regional macroeconomic surveillance organization’s growth projection for the economy is lower than the government’s seven percent to nine percent growth assumption while its 2023 growth forecast is within the economic managers’ six percent to seven percent target.Last year, the economy grew by 5.7 percent, higher than the government’s 5.5 percent target.
Meanwhile, the acceleration of domestic inflation rate since last month is seen to continue for most of the year, Khor said.
The rate of price increases in the third month this year rose to four percent due to higher oil prices.
Inflation in the previous two months stood at three percent. Average inflation for the first quarter of the year stood at 3.4 percent, still within the government’s two percent to four percent aim.
“We expect inflation to remain above the target band for most of the year. And, so, inflation is driven mostly by increases in fuel prices and food,” he said.
Khor said the domestic economy continues to have a large output gap since it has yet to fully recover from the pandemic.
“Demand is still, I wouldn’t say very weak, but it’s still modest,” he said. “On the demand side, we don’t see very strong impetus to growth. So, because of that, I think, you know, inflation is likely to decline down to below, to within the target band by next year.
Khor discounts any “urgent need” to raise the Bangko Sentral ng Pilipinas’ (BSP) key policy rates, which were slashed off by a total of 200 basis points in 2020 as a measure to help buoy the economy from the pandemic’s impact.
“I think the BSP needs to start considering withdrawing some of the policy stimulus, you know, as the economy continues to gain traction,” he added. (PNA)
