MANILA, Philippines – The government’s growth target of 6 percent to 7 percent this year is now likely “hard to reach” after the lower-than-expected 4.3-percent expansion in the second quarter, a unit of Fitch Solutions said in a report Friday.
“Our 2023 growth forecast of 5.9 percent now looks too upbeat. For this to materialize, the economy has to expand by 6.5 percent in H2 [second half]. But the economic rebound over the coming quarters will probably be much weaker,” BMI said.
“Admittedly, one key drag on Q223 growth was the 7.1 percent year-on-year contraction in government consumption, which will prove temporary as unfavorable base effects fade,” it said.
It said the Bangko Sentral ng Pilipinas’ aggressive hiking cycle was clearly weighing on the economy. Most notably, gross fixed investment slowed sharply from 10.9 percent year-on-year in the first quarter to 3.9 percent in the second quarter, BMI said.
“And it will stay weak as financial conditions remain restrictive. We expect that the Philippine central bank will be leaving its key policy rate at 6.25 percent throughout the rest of this year,” it said.
BMI said the external sector would provide little support to the economy in the second half, as global demand would remain lackluster.
“We forecast global growth to slow from 3.1 percent in 2022 to 2.4 percent in 2023,” it said.