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Looser quarantine, Covid-19 vaccine to boost growth

Continued easing of quarantine measures, along with the deployment of coronavirus disease 2019 vaccines, are expected to boost domestic growth to within-target levels this year.

Rizal Commercial Banking Corp. chief economist Michael Ricafort forecasts a growth, as measured by gross domestic product, of between six percent to seven percent for the economy this year, close to the 6.5-percent to 7.5-percent target of economic managers.

Ricafort said the timely approval of the P4.5-trillion national budget for this year is also a plus since it wouldl ensure that infrastructure programs would be financed.

He also projects the passage of priority reform bills like the Corporate Recovery and Tax Incentives for Enterprises, which would reduce corporate income tax; and the Financial Institutions Strategic Transfer bill early this year.

Further cut in banks’ reserve requirement ratio, which has been reduced by as much as 200 basis points last year, is also seen as a boost to the domestic economy as this would further lower borrowing costs.

The rcbc chief economist, however, cited risks to domestic growth including the continued increase of Covid-19 cases in the US, and the possible impact of continued mutation of the Covid-19, which would complicate measures that need to be implemented to address the pandemic.

He forecasts an uptick in the Bangko Sentral key policy rates to as much as 2.5 percent this year after being slashed off by 200 basis points to record low of 2 percent for the overnight reverse repurchase rate last year.

Makati City Pabakuna

The aggressive cuts in the BSP’s key rates were aimed at encouraging lending to boost economic activities and help address the pandemic.

Inflation is also expected to post a faster but within-target level of between 2.8 percent and 3.3 percent this year as the economy recovers.

The government’s inflation target until 2024 is between two perent to four percent.

The rate of price increases in the country posted a further uptick to 3.5 percent in December, but Bangko Sentral Gov. Benjamin Diokno said this remains transitory given the recent weather disturbances.

Last month’s inflation print is higher than the previous month’s .

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As of end-November last year, inflation rate averaged at 2.6 percent amid the uptick to 3.3 percent in the 11th month this year from month-ago’s 2.5 percent. which authorities point to the impact of the strong typhoons that hit Luzon during the month.