GDP seen growing 5.7% this year

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Swiss bank UBS expects the Philippine economy to grow by 5.7 percent this year.

A resilient labor market should support consumption while lower commodity prices should help to ease the current account drag, UBS said.

UBS said apart from elevated rice inflation, core inflation remains well contained. Average inflation  is seen settling at   3 percent by the end of the year as rice supply constraints ease.

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UBS said it was “surprised” by the consumption resilience, supported by robust services employment growth that likely offset inflation headwinds.

The recent data validate expectations of a more secure recovery in the Philippines, with the Bangko Sentral ng Pilipinas (BSP) expected to start cutting rates in June, it added.

“If our expectations for a deeper  (US) Fed(eral Reserve) rate cut cycle — or more than 200 basis points (bps) — pan out, we expect (the) BSP to cut by 100 bps this year. If the Fed’s cuts are delayed to second half, and only by 75 bps, BSP would likely only cut after the Fed,” UBS said.

Grace Lim, UBS Investment Bank Asean and Asia economist, said Philippine banks are likely to post a loan growth of “slightly above 10 percent,” citing the increasing gross domestic product (GDP) growth as well as the solid nominal GDP growth.

“We don’t see any evidence of asset quality risk. And as rates come down a little bit, that could actually spur demand for loan growth,” Lim said.

UBS is positive about the sector’s asset quality, Lim added.

“If there are big PPP (public-private partnership) projects coming through, that could also spur some demand for loans….maybe towards the second half of the year,” she said.

Lim said  when it comes to large-scale projects, investments tend to  spread out.

“So, investment would actually be taking place over quite a number of quarters, in fact, in quite a number of years,” she added.

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