The Philippine economy is expected to recover to around 6.5 percent this year, which largely depends on the re-opening of the domestic economy and containment of coronavirus disease (Covid-19) infections, an official of HSBC said on Wednesday.
This growth forecast is the lower end of the government’s 6.5- to 7.5-percent target for this year.
In a virtual briefing, HSBC Managing Director and chief market strategist for Asia Cheuk Wan Fan said the recovery is expected after a projected 9.7 percent contraction, as measured by gross domestic product (GDP), for 2020.
She forecasts the Philippine economy to be in tune with the expected cyclical recovery in the region, although lagging compared to other Asian countries because of the pandemic’s impact.
“Recovery of the Philippine economy will largely hinge on the containment strategy in the fight against the Covid pandemic,” she said.
With the expected economic recovery, Fan discounts any cut in the Bangko Sentral ng Pilipinas’ key policy rates this year after the 200 basis points reduction last year.
She, however, forecasts as much as 200 basis points slash in banks’ reserve requirement ratio, similar to what monetary authorities implemented last year, in the second half of this year.
Business sentiments last year, she said, were dampened by the pandemic but this is expected to improve this year, along with consumer confidence, on continued re-opening of the economy, the Brexit, and the improvement of the employment situation.
“This being said the focus will be more on fiscal stimulus,” she said, citing the importance of government spending to lift domestic output.
She also predicts the peso to continue to strengthen against the US dollar and close this year at P46-level from the current P48-level.
She attributed this forecast to the continued improvement of the country’s current account surplus, the depreciation of the US dollar and the continued inflows of overseas Filipino workers’ remittances. CURRENTPH