An official of banking giant HSBC forecasts better output for the Philippine economy this and next year, with output seen at 6.4 percent and 6.5 percent, respectively, making the country among the best in the world.
In a briefing, HSBC managing director and chief market strategist for Asia Cheuk Wan Fan said the banking giant expects domestic growth to recover from the expected 5.8 percent output in 2019.
“According to our assessment, we expect the Philippine economy to outperform the regional as well as global peers as we anticipate the growth acceleration path for the next two years,” she said.
Growth, as measured by gross domestic product, averaged at 5.8 percent in the first three quarters last year, below the government’s six-percent to 6.5-percent growth target.
Fan expects growth this year to be driven by the resilient domestic consumption and strong rebound of fixed investment, among others.
“The Philippines is another showcase of the strong consumption story in the region. We expect private consumption growth to stay,” she said.
HSBC’s growth forecast for the Philippines this year alone is short of the government’s 6.5 percent to7.5 percent band for 2020-2022, which Fan attributed to the impact of external developments.
“It’s quite close to the government target because we still maintain a relatively cautious on the external demand because the global economic slowdown will continue to remain a headwind for the Philippine economy,” she said.
With growth seen to improve, Fan expects the Bangko Sentral to further slash key policy rates by 50 basis points at 25 basis points each in the first and second quarters this year.
She said central bank rate cuts would be a regular thing in the region this year, and would “underpin a relatively favorable investment environment in Asia because central bank easing actions will improve the outlook for bonds”.
She also forecasts a total of 200 basis points reduction in banks’ reserve requirement ratio each this year and 2021 after a total of 400 basis points cut in 2018.
She said the projected RRR and BSP policy rate cuts “will reduce the relatively high carry buffer of the Philippine peso”, with the latter seen to weaken to 53:$1 level against the greenback from the 51:$1 level to date.
Meanwhile, obstacles faced by the economy last year are not expected this year, making an economist optimistic for the return of domestic expansion to the six-percent level.
In a report, ING Bank Manila senior economist Nicholas Mapa said the country saw the “Tale of 2 halves” last year after the delay in the approval of the national budget and the weakening of investments due to the impact of the total of 175 basis points increase in BSP key policy rates in 2018.
These issues are aggravated by the risks from the US-China trade tensions, which made investors wary, he said.
“With the domestic speed bumps in the rear view mirror, we can expect growth to pick up in 2020 and return to 6 percent firing on all cylinders form,” he added.
Growth is seen to get further boost from strong domestic consumption as inflation remains low.