HSBC lowers 2011 PHL growth forecast to 4.3%

Hong Kong and Shanghai Banking Corp. (HSBC) has lowered its Philippine economic growth forecast to 4.3 percent from 5.2 percent this year due to the lower-than-expected domestic output in the second quarter. In the British banking giant’s latest flash note on the country’s economy, HSBC economist Trinh Nguyen said the cut “is still a respectable outcome given the massive drag from the trade side." Last Wednesday, the National Statistical Coordination Board said the Philippine output decelerated to a low 3.4-percent growth in the second quarter. HSBC now expects the Philippines’ third-quarter gross domestic product (GDP) to grow 4 percent, from its earlier forecast of 5.2 percent, and the fourth quarter output at 5.3-percent from the 6 percent. “Growth, in short, looks set to slow further, but is unlikely to collapse. Household spending and rising public outlays should help growth tick over even if world trade takes another hit," Nguyen added. Meanwhile, HSBC has lowered its inflation forecast to 4.7 percent from 5.2 percent on expectations that consumer prices will accelerate by 4.8 percent on average instead of 5.6 percent in the third quarter and by 4.7 percent instead of 5.8 percent in the fourth quarter. The bank, however, raised 2012’s inflation forecast to 5.2 percent from 4.5 percent. “As mentioned, we chopped off our inflation forecast for this year from 5 percent to 4.7 percent. For next year, too, it looks unlikely that prices will rise briskly enough to breach the official target," Nguyen said. Keeping interest rates 'steady' Nguyen added that with the lower GDP growth and average inflation for 2011 and 2012, the Bangko Sentral ng Pilipinas (BSP) will likely keep its interest rates steady until the first quarter of 2012 before it imposes a 25-basis point hike in the second quarter. With the lower GDP growth forecast and slower inflation this year and next year, Nguyen said the BSP would likely keep interest rates steady until the first quarter of 2012 before imposing a 25 basis point increase in the second quarter. “Well, we believe central bank officials can afford to relax for the time being. We had initially penciled in a few more rate hikes by year-end. That looks a little bit of a stretch now. Instead, we are changing our call to a hold until the second quarter of 2012," the investment bank said. Earlier, the BSP Monetary Board lowered its inflation forecast to 4.7 percent from 5.06 percent this year, and to 3.7 percent from 3.9 percent for 2012 due to stable oil prices in the global market. Between 2011 and 2014, the BSP set an inflation target of 3 to 5 percent. — PE/VS, GMA News