Philippines: DBS says PH needs to guard against economic overheating – 12 Jun 2017

  • The Philippines needs to watch out for signs the economy may be overheating, according to DBS Bank Ltd of Singapore. The Singaporean bank noted that despite the less-than-expected economic growth in the 1Q17, investments have grown by an average of 20% since 2015-this was more than triple the 6.2% average growth over a 10-year period.
  • The bank also noted that credit growth has reached 18% which was near the record high of 20% in 2014. Despite inflation slowing to 3.1% in May 17 from 3.4% in Apr 17, DBS raised its inflation forecast for the Philippines to 3.2% for 2017 and 2018 from a previous forecast of 2.8% for 2017 and 3.0% for 2018.
  • The bank said higher food and transport cost have been pushing the consumer price index higher since the start of 2017. DBS added that prices will also likely go up due to the effects of proposed tax reforms being tackled by Congress. DBS also expects the BSP to hike interest rates by 50 basis points in 3Q17.
  • “While our current inflation forecasts still fall within the BSP’s official target of 2-4%, we reckon that rate hikes are imminent,” DBS said.

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