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StanChart cuts Ph growth forecast

Lower-than-expected growth of the Philippine economy in the first quarter of 2017, at 6.4 percent from quarter-ago’s 6.6 percent, made Standard Chartered Bank cut its full year forecast for the country but expects better output in the second half of the year.

In a briefing Tuesday, Standard Chartered ASEAN Economic Research head Edward Lee cited the bank’s report entitled “Global Focus – Q3-2-17 Swans, bulls and bears,” wherein the British multinational banking and finance institution projected domestic growth to be at 6.5 percent from 6.8 percent previously.

The report said weak investment growth is the reason for the adjustment in the growth forecasts.

It, however, expects growth to post better output in the second half of the year on better investment performance.

Lee attributed the weak contribution of investments on growth from January to March this year to “mark-to-market issue” as volatilities in the global financial markets, in line with the development in the US, Europe and China, affected investors’ risk appetite.

He, on the other hand, said consumer spending, which is among the major domestic growth drivers, remained “relatively stable.”
“So I’m looking at much gains is in investments (for the second half),” he said.
Amid the cut on the bank’s 2017 growth projection for the country, the report expects the Philippines to be among the robust economy in the Association of Southeast Asian Nations (ASEAN) this year.
“Robust domestic demand and steady services-sector growth should continue to provide support,” it said.
Inflation is seen to have reached its peak this year when it hit 3.4 percent last March and April.
In the first half of the year, rate of price increases averaged at 3.1 percent, slightly above the mid-point of the government’s two to four percent target for 2017 until 2020.
Last June alone, inflation further slowed to 2.8 percent from month-ago’s 3.1 percent.
This deceleration made Lee discount any change in the Bangko Sentral policy rates this year.
To date, the BSP’s overnight borrowing or reverse repurchase rate is three percent, the overnight lending or repurchase rate is 3.5 percent and the rate of the special deposit account facility is 2.5 percent.
These three represent the central bank’s interest rate corridor, with the SDA as the floor rate, the RRP as the key rate and the RP as the ceiling rate.
Lee said possible developments that might impact on their BSP rate forecast is improvement of global economic outlook and uptick in the inflation rate.
He expects inflation to average at three percent in the second half of the year.