ANZ RESEARCH maintained its 5.6% gross domestic product growth forecast for the Philippines, citing the dampening effects of slowing bank lending and manufacturing sales.
“High-frequency data, such as waning credit growth and manufacturing sales, weaker consumer confidence and limited capacity expansion plans validate our view,” it said in its Asia Economic Outlook.
In November, manufacturing output, as measured by the volume of production index (VoPI), rose 1.7% year on year in October, according to preliminary results of the Monthly Integrated Survey of Selected Industries.
This was much weaker than the 6.7% increase in October 2022 and the 9.9% logged in September. It also marked the weakest reading for manufacturing’ growth since the 0.04% decline in June 2022.
On a month-on-month basis, the manufacturing sector’s VoPI contracted 4.1%, a reversal of the 1.5% posted in the previous month.
Year to date, average factory output growth stood at 5.6%, slower than 17.5% in the same period in 2022.
Meanwhile, the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 52.7 in November from 52.4 in October, indicating an improvement in forward orders for materials to be processed later, the strongest reading since February.
A PMI reading above the 50 mark denotes greater anticipated business activity, while a reading below 50 signals deterioration.
Outstanding loans by big banks rose 7.1% year on year to $11.3 trillion in October.
October credit growth was stronger than the 6.5% expansion seen in September, marking the fastest rise in bank lending since the 7.2% seen in August.
On a month-on-month basis, outstanding universal and commercial bank loans rose 1.4%.
The Philippine growth forecast for 2023 had been raised to 5.2% from 5% in September. However, ANZ Research lowered its forecast for 2025 to 5.9% from 6%.
ANZ Research’s forecasts for 2023, 2024, and 2025 are all below the government’s recently adjusted forecasts of 6-7%, 6.5-7.5%, and 6.5-8%, respectively.
ANZ Research also maintained its 6% and 3.5% outlook for 2023 and 2024 inflation, respectively, despite recent easing in the indicator in the last two months.
“The moderation in October and November headline inflation brought about some relief after two months of renewed price pressures. We expect consumer prices to fall back below 4% year on year by early Q1,” it said.
In November, headline inflation slowed to 4.1% from 4.9% in October, the 20th straight breach of the BSP’s 2-4% target. Year to date, inflation averaged 6.2%.
“However, sustaining it below 4% could be a challenge as dry weather conditions could push food prices higher. Food constitutes 34.8% of the CPI (consumer price index) basket. The double-digit rise in rice prices in September, despite the implementation of price ceilings, highlights the need for more effective domestic price control measures,” ANZ Research noted. — Aaron Michael C. Sy
