MANILA – ANZ Research has maintained its 6.2-percent growth forecast for the Philippine economy this year, pending incoming data for the first quarter vis-à-vis the impact of the coronavirus disease 2019 (Covid-19).
In a report, the research unit of the Melbourne-headquartered investment bank continued to see the recovery of the domestic economy, although this forecast is to be delayed because of the epidemic’s impact.
Citing the impact on tourism, remittances, and trade, among others, the report said Covid-19 may hit the domestic economy’s first-quarter output, as measured by the gross domestic product (GDP), by as much as 0.42 percentage point.
“The impact on full-year GDP is unclear for now. It will depend on the scale and duration of the outbreak, as well as how quickly the Philippine economy can rebound subsequently,” it said.
The report expected a large part of the knockout to happen in the first three months of the year, with recovery expected in the second half of the year due to monetary and fiscal stimulus.
“In this scenario, the impact of the Covid-19 on full-year growth should be relatively modest,” it said.
It also saw the Bangko Sentral ng Pilipinas (BSP) delivering another 25-basis-point reduction in its key policy rates in the second quarter this year after the same level of rate cut last February 6.
The forecast also took into account the wait-and-see stance for first-quarter economic data but the report said “it is conceivable that a higher-than-expected impact from the coronavirus may extend the easing cycle further.”
“Separately, cuts in the reserve requirement ratio are also likely to continue,” it added.
Last year, the central bank’s key policy rates were slashed by a total of 75 basis points after the 175-basis-point increase in 2018 to address the elevated inflation rate.
Banks’ reserve requirement ratio (RRR) was also reduced by as much as 400 basis points.
With a drop in the rate of price increases last year, which bottomed out to 0.8 percent last October, economists said Philippine monetary officials have more leeway to cut key rates this year since growth is also expected to recover sans the Covid-19 issue. (PNA)
