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The Philippine economy will likely expand by more than six percent this year, but returning to pre-pandemic levels may take a few more years, British banking giant HSBC said in a report by Philippine Star.
In a virtual briefing, Fan Cheuk Wan, chief investment officer for Asia, Global Private Banking and Wealth at HSBC, said the Philippines is likely to post a gross domestic product (GDP) growth of 6.2 percent this year.
“We think the key driver for the growth recovery remains the economic reopening. We also anticipate that the growth of the tech cycle will also benefit the Philippines because an important driver for the Philippine economy is actually the electronics industrial growth,” Fan said.
The country is expected to see a “pretty steady recovery in 2022,” Fan added.
HSBC chief investment officer for Southeast Asia James Cheo said there are early signs of green shoots for the economy, including the rebound in high frequency indicators such as motor vehicle sales and industrial production.
Cheo also said that remittances from overseas Filipino workers (OFWs) continue to grow, ensuring a robust private consumption.
“Meanwhile, investment activity is likely to strengthen, driven by the resumption in big infrastructure projects, such as the first segment of the Metro Manila Subway Project and the North-South Commuter Railway Project,” Cheo said.
He said the proposed 2022 national budget has an infrastructure outlay of P1.18 trillion or 5.3 percent of GDP, 15 percent higher than the already high spending in 2021.
“We expect 2022 GDP to accelerate to 6.2 percent, an impressive rebound, but still reflecting a prolonged recovery to pre-pandemic output levels,” Cheo said.
The British banking giant sees inflation easing to 3.7 percent this year after exceeding the two to four percent target of the Bangko Sentral ng Pilipinas (BSP) when price movement accelerated to 4.5 percent last year from 2.6 percent in 2020 due to higher food and oil prices.
Despite relatively high inflation, Cheo believes the Monetary Board would likely keep monetary policy stance supportive of growth.
HSBC expects three rate hikes from the US Federal Reserve this year.
“We do not think an accelerated pace of US Fed monetary tightening will have much of a bearing on the BSP,” Cheo said.
He said the BSP is likely to further lower the reserve requirement ratio by 50 basis points in the first half before hiking interest rates by 50 basis points in the second half.
According to HSBC, the peso may weaken further to 52 by end- 2022 after shedding 6.2 percent to settle at 50.999 in end-2021 from 48.023 to $1 in end-2020.