Slower growth seen in Q2 2022 amid rising prices — poll

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Metro Manila (CNN Philippines, August 5) — The economy may have expanded at a milder rate from April to June with the quick rise in commodity prices possibly weighing on spending, according to a CNN Philippines poll among analysts.

Forecasts in the survey spanned from 7.2% to 9.3%, averaging 8.15%. This is milder than the growth rates of 8.3% registered in the first three months of the year and 12.1% in the second quarter of 2021.

Economists cited stronger consumer spending and election-related expenditure amid looser pandemic restrictions during the period, but not without flagging the impact of inflation.

"It looks to us that private consumption lost substantial momentum in the three months to June, in the face of the sudden reaccelerating in headline inflation," said Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco, forecasting growth of 8.1% for the quarter.

Inflation hit year high after year high during the three-month stretch. It sped to a nearly four-year high of 6.1% in June, pushing year-to-date inflation further above the Bangko Sentral ng Pilipinas' (BSP) 2-4% target band at 4.4%.

RELATED: Consumers deal with weaker peso power amid surging inflation

RCBC chief economist Michael Ricafort, who sees the economy growing 8% during the period, also cited quicker inflation as an offsetting risk factor to second-quarter growth. He particularly mentioned the increase in global oil prices worsened by the Ukraine-Russia war.

The analysts also noted the recovery in sectors like manufacturing and services also due to laxer COVID-19 rules.

"Robust domestic tourism and mobility gauges in retail spots also appear to confirm that revenge-spending and retail therapy will likely be behind a potentially strong print despite headwinds emanating from the Russia-Ukraine war and the cumulative 50bps (basis points) BSP rate hikes in May and June," said BPI lead economist Jun Neri, whose growth forecast is 8.1%.

Growth 'on track' to full-year target, but inflation still a threat

While economists expect full-year growth to settle within the 6.5-7.5% target band set by President Ferdinand "Bongbong" Marcos Jr.'s economic team, they still warned about rising prices and borrowing costs.

"We have to watch out for higher inflation which may dampen consumption and higher interest which may dampen private investment," University of Asia and the Pacific economist Bernardo Villegas said.

The BSP's policy rate is now at 3.25% after July's surprise three-quarters of a percentage point (75 bp) hike as it cracks down on surging inflation. And rates could go up again in August by as much as half a point, said BSP Governor Felipe Medalla earlier.

Meanwhile, UnionBank of the Philippines chief economist Carlo Asuncion flagged geopolitical risks which now include the brewing conflict between China and the United States. This heightened after US House Speaker Nancy Pelosi's visit to Taiwan, which offended Beijing.

RELATED: China's military drills around Taiwan threaten to upend global trade 

He also warned about the impact of global monetary policy tightening, which comes as other central banks also aggressively hike rates to arrest the rapid increase of commodity prices in their countries.

"Sequentially momentum will also be moderate given higher prices, weaker global trade, and less scope for catch-up as most restrictions are now removed. We expect the effect of monetary tightening to start kicking in towards the end of the quarter, with the impact to be more evident in 2023," said Oxford Economics assistant economist Makoto Tsuchiya.

The Philippine Statistics Authority will report on the economy's second quarter performance on Aug. 9.