FITCH Solutions is keeping its 2023 Philippine growth forecast of 5.9 percent with domestic activity seen slowing in the wake of continued monetary policy tightening.
"We are forecasting GDP (gross domestic product) growth to slow from 7.6 percent in 2022 to 5.9 percent in 2023, slightly more downbeat than the government's forecast range of 6.0 to 7.0 percent," country risk analyst Low Shi Cheng said during the Fitch units' Asia Pacific Macroeconomic Update webinar.
With GDP growth having slowed to 7.2 percent in the last quarter of 2022 from 7.6 percent three months earlier, Cheng said, "We think that a more pronounced slowdown will likely take hold over the coming quarters."
In addition, Fitch Solutions also said that "the Philippines will also receive little support on the external front as weakening global demand will act as a drag on Philippine exports."
Monetary authorities have raised key interest rates by 425 basis points (bps) since May last year in a bid to address surging inflation, which peaked at 8.7 percent in January this year.
While consumer price growth has since slowed for two months in a row, Fitch Solutions expects a final 25-bps increase to be ordered, which would bring the policy rate to an over 15-year high of 6.5 percent this year.
Raphael Mok, Fitch Solutions Asia country risk head, said inflation was likely to continue moderating, which would allow central banks to ease up on tightening.
"This mainly because price pressures have fallen in recent months due to easing supply chain disruptions, lower commodity prices, US dollar weakness, and we expect that inflation will likely be more moderate for most economies by the end of the year," he said.
Fitch Solutions, meanwhile, said the country's current account deficit could narrow to 4.1 percent of GDP this year due to lower commodity prices and steady remittance inflows. The forecast was 4.7 percent in January.
"While we expect a slight improvement in the Philippines' external position, it will remain considerably larger than its pre-pandemic historical five-year average of -0.4 percent," the Fitch unit said.
Fitch Solutions said it was ruling out a sharper narrowing as "faltering global demand will continue to weigh on the overall deficit."
Source: Manila Times