WHILE gross domestic product (GDP) data from the Philippines beat Oxford Economic’s expectations in the first quarter of 2023, the think tank said its tracker continues to soften, pointing to a significant weakening in growth due to poor export performance and delayed impact of a sharp monetary tightening.
The UK-based think tank described growth within the Association of Southeast Asian Nations (Asean) region as “some steady, some softening.” For one, it said the “brighter spots” of the region are Indonesia and Thailand. In Indonesia, Oxford said activity looks to be growing steadily, around the usual prepandemic pace of 5 percent.
In Thailand, Oxford said its model has “underestimated growth in the past few quarters, likely because it doesn’t fully account for the outsized importance of tourism.”
In contrast, the UK-based think tank said, “Elsewhere the story is less upbeat” when it comes to the growth of the Philippines.
In Oxford Economics’ forecast last February 2023, the UK-based think tank said the country’s economic growth will only reach 4.1 percent this year and 4.5 percent in 2024 on the back of sticky inflation which is expected to dampen demand.
“Our tracker continues to soften pointing to a significant weakening in growth. That’s consistent with the headwinds faced from a poor export performance and the delayed impact of a sharp monetary tightening,” Oxford Economics said.
The UK-based think tank mentioned that Bangko Sentral Pilipinas “is likely to be finished” after pausing its rate hikes for the first time recently.
The BSP decided to pause its aggressive monetary policy tightening campaign last May 18 as it believes that inflation is now “firmly on track” to hit the government’s target.
According to Philippine Statistics Authority (PSA), Inflation slowed to 6.6 percent in April 2023, the slowest in eight months and the third consecutive decline for the year.
“A late reopening in Asia, with tourism rebounding, supply chains easing, and pent-up demand being released, has coincided with a sharp tightening in monetary policy, both at home and abroad, and a tight reversal in external goods demand,” Oxford Economics said.
“This confluence of push and pull factors makes gauging economic momentum a difficult task,” the UK-based think tank added.
Further, Oxford Economics said, “With our model suggesting economic data will disappoint any hopes of a turnaround off the back of the Q1 GDP figures, policymakers are likely to remain in wait-and-see mode, rather than carrying on or resuming their hiking cycles.”