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PH to outperform peers this year – HSBC

THE Philippine economy is likely to outperform its regional peers this year as easing monetary policy, healthy private consumption, stable remittances and increased government spending would support gross domestic product (GDP) growth of 6.4 percent, an analyst from HSBC Private Banking said.

“We expect the Philippine economy to outperform regional, as well as global peers, as we anticipate the growth acceleration path for the next two years,” Cheuk Wan Fan, HSBC Private Banking managing director and chief market strategist for Asia, announced during a briefing on Tuesday in Taguig City.

HSBC’s forecast falls below the government’s target range of 6.5-and-7.5-percent GDP growth for 2020. Latest data showed that GDP accelerated to 6.2 percent in the third quarter after the slower-than-expected 5.6-percent and 5.5-percent expansions in the first and second quarters, respectively.

Fan explained that the outlook was based on the banking giant’s view that private consumption would remain healthy and investments growth will recover to 10.7 percent from 2.3 percent in 2019 in the absence of a budget delay.

That said, she expects the government’s budget deficit to widen from 2.4 percent of GDP in 2019 to 3.2 percent in 2020.

Meanwhile, continued monetary easing from the Bangko Sentral ng Pilipinas (BSP) through policy rate and the reserve requirement ratio (RRR) cuts will boost private investment and consumer confidence in the coming quarters, she added.

Fan estimated headline inflation to remain stable at 2.9 percent in 2020-2021 below the midpoint of the central bank’s 2-4 percent target range.

This will leave room for the BSP to cut policy rate further by 25 basis points in the first quarter and another 25 basis points in the second quarter of 2020, lowering the policy rate to 3.50 percent by end-2020, she said.

“This is going to be the key growth engine for the Philippines,” Fan emphasized.

Last year, monetary authorities implemented a combined 75-basis-point interest rate cut that brought overnight borrowing, lending and deposit rates to 4 percent, 4.50 percent, and 3.50 percent, respectively.

Lastly, Fan added that HSBC expects another 200 basis points of RRR cuts each in 2020 and 2021, leaving the liquidity-mopping tool at 10 percent by the end of 2021.

RRR is the proportion of current deposits that banks need to keep with the BSP against the sum they can loan out to borrowers.

Monetary authorities already reduced the operational tool by a cumulative 400-basis points cut to 14 percent last year.

Lastly, Fan forecasted remittances to remain stable and be the key driver behind strong private consumption.

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