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Moody’s raises Philippine growth forecast to 6.1%

Moody’s Analytics raised its growth projection for the Philippines to 6.1% this year from 5.7% previously, after identifying the country as a “growth leader” in the region.

Moody’s updated its previous estimate issued in March and aligned its view with the government’s official 6-7% full-year target.

In a research note on Tuesday, Moody’s Analytics Chief Asia-Pacific Economist Steven Cochrane said the region’s growth for 2023 and 2024 will outpace Europe and North America.

“Leaders of growth this year will be the Philippines, India, China and Indonesia,” he said.

“All four will continue to benefit this year from targeted fiscal support that will add to near-term growth. The Philippines and Indonesia both have substantial infrastructure construction programs to improve badly needed highways and transport services,” he added.

The government hopes to spend 5.3% of GDP or around P1.29 trillion on infrastructure this year.

For 2024, Moody’s expects growth to ease to 5.4%, lower than its earlier 6% forecast. This is below the government’s 6.5-8% target for next year.

Meanwhile, Moody’s sees inflation settling at 5.9% this year, against the 6.8% forecast it issued in March. It also maintained its inflation forecast at 2.9% for next year.

Mr. Cochrane said inflation remains high in the region, but has begun to ease since the start of the year.

“The Philippines, India, South Korea, Australia and New Zealand were among those with the highest inflation rates in the second half of last year. All have now eased downward but most are still above central bank target rates,” he said.

In the Philippines, headline inflation eased to 6.1% in May — the lowest level in a year. Still, it was the 14th straight month that inflation breached the central bank’s 2-4% goal.

Inflation has averaged 7.5% this year, higher than the revised 5.5% forecast by the central bank.

“Thus, monetary policy is expected to remain tight through the end of this year in much of the region, with some easing in policy rates early in 2024,” Mr. Cochrane added.

The Bangko Sentral ng Pilipinas paused its monetary policy tightening cycle last month. The Monetary Board has raised key rates by 425 basis points to 6.25% since May 2022.

The Monetary Board is next scheduled to meet on June 22.

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