MANILA - The Philippines should not rely solely on revenge spending to drive the economy this year amid high inflation and interest rates, according to economists of credit rating agency S&P Global.
At an online media briefing, S&P Senior Economist Vincent Conti said the upside of the current Philippine situation is the high pent-up demand which is good for many businesses.
But Conti is also seeing the flipside as revenge spending is seen slow this year.
"Pent-up demand could very well be on its last leg already. And the household savings that were driving consumption recovery could have been eaten into (due to) the very high inflation we've seen," said Conti.
Philippine economic managers have said recently that they expect the country to grow as consumer spending remains very high and as more sectors reopen following the pandemic.
Other S&P economists meanwhile said that inflation and high interest rates will dampen the Philippine growth.
"The high inflation and interest rates will erode household savings, putting a strain on low-income households," said Nikita Anand, S&P Associate Director.
Despite these challenges however, they expect the Philippine economy will still grow. They mentioned that the country has an abundant labor force, and good demographics. They add the Philippine peso has also stabilized.
S&P maintained its 5.8 percent GDP forecast for the Philippines this year, lower than the previous year. Conti also expects at least one more monetary rate hike as core inflation remains high.