Maybank lowers PHL GDP forecast for 2023

THE PHILIPPINE economy may grow slower than initially expected in 2023, according to Maybank Investment Banking Group.

In a report, Maybank lowered its Philippine gross domestic product (GDP) forecast for next year to 5.5%, from the 6.2% forecast it gave in August. This is below the Development Budget Coordination Committee’s (DBCC) 6-7% target for 2023.

For this year, Maybank upwardly revised its Philippine growth forecast to 7.3%, from 6.5% previously. This is within the government’s 6.5-7.5% full-year target range.

The Philippine economy is expected to surpass the full-year target after GDP growth averaged 7.7% as of end-September.

According to Maybank, the Philippines’ GDP expansion will be the second fastest in the region and above the Association of Southeast Asian Nations-5 (ASEAN) average for this year and in 2023.

Maybank gave a 4.7% GDP growth forecast for ASEAN-5 in 2023, slower than the 5.9% projection this year. Vietnam and Malaysia are expected to post the fastest growth at 8% this year, while Vietnam’s 6% expansion will be the fastest in 2023.

“ASEAN-5 GDP growth (+4.7% in 2023) will likely be higher than China’s (+4%) for a second consecutive year. ASEAN will be cushioned by the reopening tailwinds, while China’s shift from ‘zero COVID’ will be slow and incremental,” Maybank said.

Maybank said ASEAN is seen as a “defensive harbor” amid the rising interest rates in the United States and a possible global recession.

It noted ASEAN economies may “partially decouple” from a US recession and emerge as a bright spot, citing resilient intra-ASEAN trade and continued recovery in accommodations, food services, construction and air travel sectors.

“The reconfiguration of manufacturing supply chains away from China to ASEAN has increased FDI (foreign direct investment) significantly. The pandemic shock, development of the Electric Vehicle industries and US Chips Act have reinforced these shifts. Indonesia, Malaysia, Vietnam, and Singapore are big beneficiaries of the supply chain shifts to ASEAN,” Maybank said.

A full reopening of China’s economy may also partly offset a slowdown in the United States and Europe, and boost ASEAN’s economic outlook, Maybank said.

China is ASEAN’s largest export market and accounted for 22% of foreign visitor arrivals before the pandemic.

However, Maybank noted energy demand and prices may surge when China reopens, which may fuel global inflation and prompt central banks to further tighten.

“A China reopening will benefit commodity exporters such as Indonesia and Malaysia, but hurt energy importers, including the Philippines and Thailand, and to a lesser extent, Vietnam and Singapore,” it added.

Meanwhile, Maybank raised its Philippine inflation forecast to 4.3% in 2023, from 3.9% previously. For this year, it also hiked its average inflation forecast to 5.7% from 5.3% previously.

In the first 11 months of the year, inflation averaged 5.6%, faster than the 4% in the same period a year ago but still below the BSP’s full-year forecast of 5.8%.

“There are encouraging signs that headline and core inflation may have peaked in some ASEAN countries. The respite will provide some breathing room to central banks to moderate the pace of tightening and rate hikes in 2023,” Maybank said.

The Bangko Sentral ng Pilipinas (BSP) earlier this month raised borrowing costs by 50 basis points (bps) to 5.5%, bringing the policy rate to the highest since November 2008.

Maybank said the policy rate is expected to remain at 5.5% in 2023, before dropping to 4.25% in 2024.

The BSP recently gave signals of further tightening in 2023 in an attempt to rein in inflation. — Luisa Maria Jacinta C. Jocson