Philippines: Economy recovered faster than expected in Q4 – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest GDP figures in the Philippines.

Key Takeaways

“The Philippines’ economy recovered at a faster-than-expected pace of 7.7% y/y in 4Q21 (UOB est: +7.0%; Bloomberg est: +6.3%; 3Q21: +6.9%), bolstered by all sectors and resilient household consumption. For the full year of 2021, GDP expanded by 5.6%, in line with our projection of 5.5% (official est: 5.0%-5.5%; 2020: -9.6%).”

“Notwithstanding a stronger growth rebound in 4Q21, we maintain our 2022 full-year GDP growth forecast at 6.5%, lower than the government’s 7.0%-9.0% target, as the growth outlook remains subject to downside risks. Downside risks could arise from the pandemic, prolonged global supply chain bottlenecks, softening global growth momentum, tighter global financial conditions, and domestic policy uncertainty post the presidential elections on 9 May.”

“Although BSP has inclined to err on the side of sustaining growth rather than fighting transitory inflation, the Fed’s abrupt shift in policy since Dec 2021 has piled pressure on other central banks including BSP to embark on a wider normalization path this year. Following our revised Fed outlook this morning (27 Jan, see details in report), we are now expecting BSP to raise policy rate twice this year (+25bps each in 3Q22 and 4Q22), versus our previous forecast of just one 25bps hike in 3Q22. This will bring the overnight reverse repurchase rate to 2.50% by end-2022 (from 2.00% currently).”