PH economy seen growing up to 13 percent in Q2 due to 'low base effect'

MANILA – The Philippine economy may grow by as much as 13 percent in the second quarter of this year, ING Bank said Monday, primarily because of the "low base effect" from the same period last year. 

ING Bank Manila economist, Nicholas Mapa noted that the economy was coming from a low base in the same period of 2020, when the country's gross domestic product contracted 16.9 percent, which was the worst since the end of the Second World War. 

In the succeeding quarters, Mapa said he doesn't see growth reaching the government's target range.

For the full year, ING Bank expects growth to average 5.1 percent. This is lower than the average 6 percent pre-pandemic expansion, and the government's 6.5 to 7.5 percent target range for 2021.

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Mapa said the country may experience a sort of "slowflation" in the near-term, wherein growth would be slow while inflation is slightly above the government's 2 to 4 percent target range.

"People call it stagflation, I guess that's the buzz word that's been for the past two weeks. More like slowflation maybe--slow growth with some inflation for the next few quarters," he explained.

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ING expects inflation to average 4.05 percent this year, above the Bangko Sentral ng Pilipinas' (BSP) target range of 2 to 4 percent driven by a spike in food prices due to the local African Swine Fever outbreak as well as the impact of typhoons on agricultural output.

Despite this, Mapa believes the BSP will not pull the trigger on a rate hike this year and may only raise interest rates by 25 basis points starting the first quarter of 2022, and another 25 bps hike by the third quarter.

"They're doing the right thing in terms of trying to address the inflation expectations by telling the market that we could expect faster inflation in the next few months," he said. 

Mapa added that with the general weakness of the economy, he doesn't see inflation further accelerating once the food supply issue is resolved.

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