The weaker-than-expected first-quarter growth in gross domestic product (GDP) has triggered speculation that the central bank may limit any tightening move on its monetary policy stance, or even ease its key rates to help support the economy in the months ahead.
Given the additional concern over the impact of El Niño on agriculture and manufacturing as the summer heat peaks, private bank economists do not see GDP growing unimpeded in the second quarter.
The GDP print for the first quarter makes the government’s 7 percent to 8 percent growth target for 2015 decidedly optimistic, they said.
Keeping their hopes up despite the sharp slowdown in the first-quarter growth figures but adding a bit of caution to their statement, analysts at UK-based investment bank Barclays said they expect the Bangko Sentral ng Pilipinas (BSP) to maintain its neutral to moderately hawkish rhetoric in the coming months, given the looming risk of El Niño on food prices.
“We maintain our 2015 growth forecast at 6.5 percent, with downside risks should we see no significant rebound in the second quarter. Private consumption remained solid in the first quarter, and government spending is likely to pick up strongly in the second quarter, as both the government and central bank have signaled,” they said in a Barclays report.
Barclays forecast a 25-basis point hike in the BSP’s key policy rates by the fourth quarter of 2015.
BPI Vice President and lead economist Emilio Neri Jr. sees an easing in the central bank’s stance in June when the Monetary Board meets next.
“The weak print may trigger speculation that the monetary authorities will consider easing the policy rates in their June 25 meeting, more so that inflation prints for May and June are expected to be some of the lowest this year,” Neri said.