The Philippines economy appears to be one of the promising economies in the Asean region. With national elections news increasingly taking over local news, macro fundamentals continue to be strong. The relatively slow remittances growth rate from overseas Filipinos is being shrugged off by solid private consumption. January’s credit grew 15.6%, suggesting confidence in growth rate. According to ANZ, the overall business outlook continues to be high for current and coming quarters.
“We continue to expect GDP growth to average 6.1% y/y in 2016 before easing to 5.8% in 2017”, says ANZ.
Philippines’ inflation path is below expectations due to lower oil prices and excessive stocks of food.
“We have lowered our inflation forecast to 1.9% y/y in 2016 before rising to 3.0% in 2017 (from 2.9% and 3.4% respectively)”, says ANZ.
The central bank is expected to keep its policy unchanged until they have shifted successfully to the new structure of interest rate corridor in Q2, added ANZ. The interest rate corridor will be policy-neutral only if the new term deposit facility’s auction volume is enough to clean the economy’s structural excess liquidity.
If Philippines’ constant excess liquidity is handled carefully, it can release around 7% of GDP in terms of liquid assets, according to ANZ. It added that the excess liquidity, with the multiplier effect, can carry on driving economy to a higher potential growth rate.
