‘Philippines economy losing steam’

MANILA, Philippines — The Philippine economy is losing steam much faster than anticipated, prompting another foreign bank to slash the country’s gross domestic product (GDP) growth forecast this year.

In its latest Asia Economic Outlook Q4 2023, ANZ said it has lowered its GDP growth projection for the Philippines to five percent, from 5.8 percent, for this year.

“The Q2 2023 outcome was weaker than anticipated and prospects are subdued. Private consumption growth should continue to moderate on the back of slower growth in remittances and an uninspiring pattern of job creation,” ANZ said.

It added that both the Philippine Statistics Authority (PSA) and World Bank have confirmed that the bulk of new job creation has been in agriculture and sales, both of which are low paying.

GDP growth slowed significantly to 4.3 percent in the second quarter from 6.4 percent in the first quarter of the year, bringing the average to 5.3 percent in the first half and way below the government’s six to seven percent target for 2023.

ANZ said the flow of funds data suggests households are dissaving and the only tangible support to household consumption has been credit.

“Consumption credit has been rising in double digits and is also reflected in sturdy auto sales and consumer goods imports. However, this support is unlikely to be sustained in the face of higher interest rates and tighter bank lending standards,” it said.

According to ANZ, the recent implementation of a new liquidity absorption tool by the Bangko Sentral ng Pilipinas (BSP) would only enhance the transmission of the increases in the policy rate to lending and deposit rates.

The BSP‘s Monetary Board raised interest rates by 425 basis points between May last year and March this year to tame inflation and stabilize the peso that slumped to an all-time low of 59 to $1 last October.

It maintained a hawkish pause for four straight rate-setting meetings in May, June, August and September amid the inflation downtrend and the stable local currency.

Inflation averaged 6.6 percent and stayed above the BSP’s two to four percent target range after quickening to 5.3 percent in August after easing for six straight months to 4.7