The Southeast Asian country’s gross domestic product rose 8.3% in the first quarter.
The Philippines’ economy grew faster than expected in the first quarter, bolstering expectations of interest rate hikes to rein in rising inflation, a key challenge facing the country’s newly elected president.
The Southeast Asian country’s gross domestic product (GDP) grew 8.3% in the January-March period from a year earlier, well ahead of forecasts and faster than expected. 7.7% expansion in the previous quarter.
The expansion marked the fastest increase since the June quarter of 2021, when growth hit 12.1%.
Bangko Sentral ng Pilipinas (BSP), the country’s central bank, holds its next policy meeting on May 19 amid growing expectations of higher interest rates to rein in rising prices that could threaten economic recovery if it is not under control.
“This robust economic recovery coupled with above-target inflation indicates policy normalization at Bangko Sentral ng Pilipinas,” Nicholas Mapa, senior economist for the Philippines at ING, said in a note.
“Philippine BSP Governor Diokno kept rates unchanged to help support the economic recovery. But with GDP now back to pre-Covid levels and with inflation accelerating, we fully expect BSP to raise its key rates at the May 19 meeting next week.
Ferdinand Marcos Jr, the son of late dictator Ferdinand Marcos, is set to take office in June after Rodrigo Duterte’s single 6-year term ends following a landslide election victory on Wednesday.
Marcos, a polarizing political figure due to his father’s 20-year repressive rule, was widely seen by investors as lacking a clear economic agenda.
“President-elect Ferdinand Marcos Jr faces a delicate balance between sustaining the economic recovery and containing the Philippines’ burgeoning fiscal deficit,” Makoto Tsuchiya and Sian Fenner, economists at Oxford Economics, said in a note on Wednesday.
“Based on the latest budget, we expect it to average 8% of GDP this year, only a modest narrowing from 8.5% in 2021 amid improving incomes thanks to a Stronger domestic demand. However, Marcos Jr’s fiscal program is unclear. He could tilt towards further fiscal expansion, which could lead to credit rating downgrades and increased risk aversion for assets. Filipinos.
Mapa, the ING economist, said Marcos’ strong tenure could open the door to “substantial economic reforms”.
“The investment community now awaits Marcos’ cabinet choices, in particular the composition of his economics team and his plans on how to address key issues such as accelerating inflation and debt consolidation – Marcos inherits a considerable debt from its predecessor,” he said. .