HSBC GLOBAL Private Banking trimmed its Philippine growth outlook to 5.7% this year, which is slightly below the government’s 7-8% target, citing the impact of the slowing global economy and soaring inflation.

During the HSBC Global Private Banking and Wealth Investment Outlook, HSBC Southeast Asia Chief Investment Officer James Cheo said the gross domestic product (GDP) projection for the Philippines was trimmed to 5.7% from the previous 6.5% outlook.

“The global momentum was much slower than we expected in the beginning of year,” he said.

Mr. Cheo said the lower growth outlook reflected the extent of the impact of supply chain bottlenecks and the Russia-Ukraine war.

“Because of these unpredictable factors, we had to kind of shave off Philippine growth by a bit. Nevertheless, 5.7% is still a very, very strong number in our view, and I think it’s a very robust outlook for the country,” he added.

The Philippine economy expanded by 8.3% year on year in the first quarter, a turnaround from the 3.8% contraction in the same period last year. It was also faster than the revised 7.8% growth in the fourth quarter of 2021.

Mr. Cheo said the further reopening of the economy will drive the country’s growth for the year.

“I think the good news is that the drivers for Philippine economy are still intact, both consumption and investments, all these rebound very strongly. The foreign workers remittances also continue to rise,” he said, adding that the incoming Marcos administration is expected to continue infrastructure projects.

However, Mr. Cheo said high inflation may dampen the economy’s recovery, especially consumer spending.

Inflation quickened 5.4% in May, the fastest increase since November 2018 and beyond the BSP’s 2-4% target band. Year to date, inflation has averaged 4.1%.

“For monetary policy, I think we expect another 25-basis-point hike in June and another 50-basis-point hike in the third quarter 2022. These hikes are really intended to frontload and dampen inflation expectations. Clearly going to 2023, we anticipate interest rates will increase by 25 basis points each quarter until the third quarter 2023, after which policy would normalize at 4%,” he said.

The BSP is scheduled to review policy settings on June 23 and on Aug. 18. — Keisha B. Ta-asan