The Philippine financial system may develop slower than beforehand anticipated in 2024, after favorable base results masked a weak point within the second quarter enlargement and painted a “deceptive image” of the financial system’s well being, BMI Analysis stated.
In a commentary despatched to reporters on Monday, the unit of the Fitch Group trimmed its gross home product (GDP) progress forecast on the Philippines for this yr to six %, from 6.2 % beforehand.
READ: Philippine financial system expands 6.3% in Q2, says PSA
To hit the outdated projection of BMI, the home financial system must develop by round 6.4 % within the second half which, the Fitch unit stated, could be “unlikely.”
However the downwardly revised forecast nonetheless matched the lower-end of the 6 to 7 % progress goal vary of the Marcos administration.
Overestimated
What triggered the downward revision was the 6.3-percent year-on-year enlargement within the second quarter that, BMI defined, was “flattered” by base results. This implies progress within the three months via June had been magnified after being in comparison with the year-ago degree, when GDP expanded by simply 4.3 %.
Information confirmed the financial system grew by simply 0.5 % on a quarter-on-quarter foundation within the April-June interval.
“The newest progress outturn clearly confirmed that we’ve overestimated the well being of the Philippine financial system,” BMI stated.
Additional carry
“A lot of this weak point stemmed from a poor efficiency within the exterior sector, as we had anticipated,” it added. Figures confirmed exports solely contributed 1.2 share factors (pp) to the most recent headline GDP progress, halving the robust 2.4 pp share recorded within the earlier quarter.
“Towards the backdrop of a slowing international financial system in H2, exterior demand will show even much less supportive over the approaching quarters.”
READ: DBM hails GDP report, vows to create extra jobs to maintain financial upswing
The second quarter GDP progress could be one of many key knowledge factors that the Bangko Sentral ng Pilipinas (BSP) would think about at its Aug. 15 financial coverage assembly.
Some economists anticipated the BSP may kick off its easing cycle this week after progress of shopper spending—which traditionally accounts for over 70 % of GDP—eased to 4.6 %, the weakest seen postpandemic.
Nevertheless, there have been market watchers believing that the above-target inflation charge of 4.4 % in July may delay the speed cuts, though they didn’t rule out the potential for an off-cycle charge discount as floated by Governor Eli Remolona Jr. himself.
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“The silver lining is that home demand has held up fairly nicely,” BMI stated. “We anticipate imminent charge cuts by the BSP to offer an extra carry to home exercise.” INQ
