MANILA, May 14 (Bloomberg): The Philippine economy outperformed expectations in the first quarter, boosting the case for the central bank to turn its focus to fighting one of South-East Asia’s fastest inflation.
Gross domestic product in the three months through March grew 8.3% from a year ago, the Philippine Statistics Authority said Thursday, versus the median estimate for a 6.8% expansion in a Bloomberg survey. That compares with a revised 3.8% contraction in the same quarter in 2021.
"The Philippine economy is a strong and steady ship ready for whatever storms might lie ahead,” Karl Chua, the economic planning secretary, said in a briefing.
The strengthening recovery spurred calls from economists, including at Goldman Sachs Group Inc., for Bangko Sentral ng Pilipinas to raise borrowing costs, as global and regional peers move to stamp out price pressures fueled partly by the war in Europe.
The nation is already home to the second fastest inflation rate in Southeast Asia, with the outlook for prices clouded by lockdowns in China -- its biggest trading partner.
Policy makers are "ready to adjust” monetary settings if there’s "material risk” of supply-side pressures spilling onto the demand side, BSP Governor Benjamin Diokno said in a statement after the GDP data. The forecast-beating output "helps fulfill the BSP’s vision” of a more sustainable post-Covid economy, he said. BSP is scheduled to review the key rate on May 19.
"The narrative that the economy is in need of support may no longer hold water,” said Nicholas Mapa, a senior economist at ING Groep NV in Manila. "A robust recovery coupled with above target inflation means BSP will hike rates next week, lest they fall further behind the curve with regional central banks.”
Private consumption and investments, both key growth drivers, jumped during the quarter, while government spending weakened in the same period.
That tasks Ferdinand Marcos Jr., the presumptive president-elect after the May 9 elections, with improving public spending, as well as focus on boosting jobs and managing food and energy prices.
The nation’s policy makers have said GDP needs to grow at least 6% for the next five to six years to help pare debt.
Tackling inflation will be key to achieving that goal, given policy makers from India to South Korea have voiced concern about price growth emerging as a greater threat to growth by denting disposable incomes and, in turn, demand in the economy.
The larger-than-expected reopening rebound in the first quarter pushes the annual 2022 GDP growth forecast up to 7.1%, from 6.7% previously, Goldman economists including Jonathan Sequeira and Rina Jio wrote in a report to clients.
"We continue to expect the BSP to deliver its first 25 basis-point policy rate hike in its meeting next week,” they said. - Bloomberg
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