The HongKong and Shanghai Banking Corp. (HSBC) in the Philippines headed by banker Sandeep Uppal is now expecting as stronger economic expansion in the Philippines amid the continued reopening of the economy from strict COVID-19 lockdowns.
HSBC chief investment officer for Southeast Asia James Cheo said the British banking giant is now expecting a faster gross domestic product (GDP) growth of 6.5 percent instead of 5.7 percent for this year.
According to Cheo, both private consumption and investment in the Philippines have been rebounding sharply.
“The good news is that drivers of the Philippine economy are still intact. Foreign worker remittances have continued to rise, and the government is progressing with the next round of infrastructure projects. We believe that both of these growth drivers will support the Philippine economy to grow by 6.5 percent in 2022,” Cheo added.
However, Cheo warned that the Philippine economy faces the headwind from high commodity prices given that it is one of Asia’s largest oil and gas importers and a sizeable food importer.
According to Cheo, the inflationary impact will limit result in near term monetary tightening.
After staring its interest rate liftoff with a 25 basis points rate hike bringing the benchmark rate to 2.25 percent from an all-time low of two percent, HSBC said it expects the BSP to continue raising interest rates to curb rising inflationary pressures.
The British banking is still expecting a 100 basis points rate hike for 2022 and another 100 basis points for 2023.
“For monetary policy, we expect policy rate to increase to 3.25 percent by the end of 2022. Thereafter, we anticipate the policy rate to be increased to four percent by Q3 2023,” Cheo said.