Security Bank has lowered its second-half growth outlook for the Philippine economy, revising its projection to 5.5 percent from its previous forecast of 5.53 percent.
In a note to investors, bank economists Angelo Taningco and Chino Genuino cited several factors for the downward adjustment, including inclement weather, heightened political risk and new tariffs.
Tropical storms have caused widespread flooding and job losses, particularly in weather-sensitive sectors like agriculture and construction. The Philippine Statistics Authority (PSA) reported that unemployment rose to 5.3 percent in July from 4.7 percent a year earlier.
The bank also noted that recent allegations of corruption and substandard government flood control projects have increased political risk, which is expected to deter domestic capital formation and foreign direct investment.
In the first half of the year, gross capital formation grew by only 2.4 percent, and foreign direct investment (FDI) net inflows shrank by 23.8 percent to $3.4 billion.
Additionally, the economists foresee a slowdown in the country’s exports due to the new 19 percent modified reciprocal tariff imposed by the US on most Philippine exports, particularly if exemptions for products like semiconductors and agricultural goods are not extended.
Despite the reduced forecast, the bank’s projection of 5.5 percent still aligns with the lower end of the government’s official target of 5.5 percent to 6.5 percent.
The report also highlighted other potential risks, including a deterioration in public governance, persistent weather disturbances, and a collapse in international trade agreements.
Security Bank anticipates that inflation will accelerate for the rest of the year, though it is expected to remain below the government’s 2 percent to 4 percent target range.
The bank forecasts a full-year inflation rate of 1.9 percent, driven by food supply disruptions from recent storms and the 60-day rice importation suspension. The bank projects inflation to average 1.5 percent in the third quarter and 2.3 percent in the fourth quarter.
It expects the Bangko Sentral ng Pilipinas (BSP) to cut interest rates by 25 basis points at its final meeting of the year in December.
The economists said the BSP is likely to pause in October to assess the sequential inflation uptick before making any further moves. – Ruelle Castro
