Macquarie Bank of Australia said the Philippine economic growth in 2022 will remain intact at 6.2 percent under the new government, as the reopening of the economy and post-election activities will likely see consumption return.
Wealth management director for Macquarie Bank Martin Lakos said during the Australia-Philippines Economic Outlook event organized by the Australia Philippine Business Council that a Marcos presidency would unlikely impact foreign investment.
“The Philippines has been growing at an average of more than 6 percent prior to the pandemic, and we expect this growth to be intact in 2022 but higher energy and food prices are impacting inflation,” he said.
“We forecast the BSP [Bangko Sentral ng Pilipinas] shedding its dovish stance in 2022, when the economy reopens in full and when Philippine currency and inflation concerns become more pressing. We thus expect policy rates to rise to 2.5 percent in the second quarter of 2022 and further see an upside risk to this forecast,” Lakos said.
The gross domestic product expanded by 8.3 percent year-on-year in the first quarter, exceeding the pre-pandemic first-quarter level, according to data from the Philippine Statistics Authority.
“There’s a lot going for investors looking for long-term opportunities in the Philippines post-pandemic and post-elections. We have a large domestic market of 110 million people with rising middle income and excellent trade options both within Asia and beyond,” said Philippine Trade Representative to Australia Alma Argayoso.
Meanwhile, the BSP Governor Benjamin Diokno said the Russia-Ukraine conflict could affect the inflation trajectory in the Philippines.
Diokno said in an online briefing that monetary authorities remained vigilant against inflationary pressures coming from the continuing war in Eastern Europe.
“While spillovers from the Ukraine-Russia conflict will likely be limited given our lack of close economic linkage with the two countries, its impact through the commodities channel could pose upside risks to domestic inflation,” Diokno said.
He said to mitigate the impact of the conflict, the BSP supports the timely implementation of direct non-monetary measures by the government.
These fiscal policy measures include the recommendations of the Economic Development Cluster to shift to Alert Level 1 to increase domestic economic activity; increase the fuel subsidy program; reduce tariff rates for rice, corn, swine, and coal until end of the year; and provide targeted fertilizer vouchers to farmers, among others.
He said the BSP also supports the call for policymakers to provide adequate support to the most vulnerable sectors of the economy to help offset rising living costs.
The BSP carefully monitors the developments and pass-through of rising international prices to domestic inflation and possible second-round effects from supply-side pressures or any shift in the public’s inflation expectations, he said.
“In its monetary policy meeting on May 19, 2022, the Monetary Board will review its assessment of the inflation outlook and macroeconomic prospects given recent domestic and global developments,” Diokno said.
He said the BSP continues to wield a wide arsenal of policy instruments to respond to any adverse impact of the conflict and stands ready to act.
Inflation in April accelerated to 4.9 percent, the fastest in more than three years, on higher prices of food, transport, oil and electricity.
The policy-setting Monetary Board of the BSP is set to hold its meeting Thursday. The BSP has kept the 2-percent policy rate steady since November 2020. With Julito G. Rada