MANILA - A regional economic research group said high interest rates are weighing down the Philippine economy, but there is still no urgency for the Bangko Sentral ng Pilipinas to cut rates this year.

The ASEAN+3 Macroeconomic Research Office (AMRO) said it agrees with the BSP view that interest rates should remain tight until inflation has come down to within target range.

“Part of the reason why growth was somewhat weaker in the fourth quarter (of 2023) could also be that the interest rates are relatively high. But we need to keep rates tight in order to make sure that inflation goes down,” said AMRO Chief Economist Hoe Ee Khor.

But the Philippines could follow suit if the US Federal Reserve ‘starts to cut rates by the middle of this year, Khor said.

He added that as long as the economy continues to do well, there is no urgency for the BSP to cut rates.

AMRO kept its 5.6 percent 2023 growth forecast for the Philippines. This is lower than the 6 to 7 percent target of economic managers for the year.

The Philippines posted an average growth rate of 5.5 percent in the first three quarters of 2023. To hit the government's target, GDP needs to grow at least 7.2 percent in the fourth quarter.

For 2024, AMRO also kept its forecast of 6.3 percent growth this year, which is lower than the 6.5-7.5 percent target of Philippine economic managers.

AMRO meanwhile said it also expects inflation to further ease this year to within the government's 2 to 4 percent target range.

"So as you can see, the average for the whole year of last year was at 6 percent and we expect (it) to come down to 3.6 percent this year which is within the inflation target band,” Khor said.

Meanwhile, AMRO maintained its 2024 growth forecast of 4.5 percent for the ASEAN+3 region.

It believes strong domestic demand amid moderating inflation and continuing improvement in trade will propel growth despite uncertainties surrounding the global outlook.

• AMRO further cuts PH economic growth outlook