NOMURA HOLDINGS, Inc. has raised its Philippine gross home product (GDP) development estimates for this yr and 2024, although these have been nonetheless beneath the federal government’s forecast.
Within the report “Philippines: A shallower development dip,” Nomura Chief ASEAN (Affiliation of Southeast Asian Nations) economist Euben Paracuelles and analyst Rangga Cipta mentioned the Philippine economic system is now anticipated to develop by 5.5% this yr, from 4.3% beforehand.
“We now forecast a extra modest slowing of GDP development to five.5% in 2023 after a better-than-expected outturn (7.2%) within the fourth quarter final yr, which introduced full-year 2022 development to 7.6%,” Nomura mentioned.
Nomura additionally hiked its GDP development projection to six.3% for 2024 from 6%.
Each estimates are nonetheless beneath the federal government’s 6-7% goal for 2023 and the 6.5-8% purpose for 2024.
“As well as, the comparatively giant upward revisions to our US and China GDP development forecasts have a cloth affect on our Philippine forecasts by way of the export channel (each items and companies),” Nomura mentioned.
It raised its GDP development estimate for China to five.3% this yr from 4.8%, whereas it sees the US economic system increasing by 0.7% from 0.1%.
“Nonetheless, our 2023 GDP development forecast is beneath the federal government’s goal of 6-7%, on our view that home demand will doubtless be much less resilient than in previous international downturns due to persistently excessive inflation, which hurts consumption spending,” Nomura mentioned.
Inflation in addition to excessive meals and vitality costs pose draw back dangers to development, whereas elevated international direct investments and the faster rollout of infrastructure initiatives are upside dangers, Nomura mentioned.
Inflation quickened to a 14-year excessive of 8.7% in January from 8.1% in December.
“We subsequently raised our 2023 inflation forecast to five.6% from 4.4%, additional above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% goal,” Nomura mentioned.
The central financial institution sees inflation averaging 4.5% this yr earlier than easing to 2.8% in 2024.
“We preserve our forecast for BSP to hike by a further 50 foundation factors (bps) to six%, penciling in two 25-bp hikes in every of the following two conferences in February and March,” Nomura mentioned.
The central financial institution will doubtless begin slicing its coverage charge from the fourth quarter of 2023, as an alternative of the third quarter, it added.
The Financial Board elevated the benchmark charge by 350 bps to a 14-year excessive of 5.5% final yr.
The BSP is broadly anticipated to lift benchmark rates of interest at its assembly on Thursday. A BusinessWorld ballot confirmed 9 analysts count on it to hike borrowing prices by 50 bps, whereas eight analysts anticipate a 25-bp enhance.
Nomura additionally expects a slower narrowing of the fiscal deficit to 6.6% of GDP this yr from 6.8% in 2022. That is decrease than the federal government’s 6.9% forecast.
“Whereas whole revenues are monitoring above official projections in 2022, we expect they may underperform in 2023, given our nominal GDP development forecast is decrease than within the (medium-term fiscal framework). Importantly, we expect expenditures will maintain up, led by capital outlays underneath the ‘Construct Again Extra’ infrastructure program,” it mentioned. — Keisha B. Ta-asan