ANZ sees 7.1% Phl growth

MANILA, Philippines - Australia and New Zealand Banking Group Ltd. (ANZ) is forecasting Philippine gross domestic product (GDP) growth to hit 7.1 percent in 2013, easing off to 6.5 percent next year.

“We expect domestic demand to remain robust to offset weakness among regional trading partners,” Eugenia Fabon Victorino, ANZ analyst for Asia Pacific, said in a report.

Victorino said they expect 2013 average inflation at 3.1 percent, although cited strong upwards risks to 2014 average inflation of 3.4 percent “due to the surge in M3 (domestic liquidity) growth.”

ANZ sees further M3 growth as funds shift from the relatively risk-free special deposit accounts (SDAs) to low-risk assets such as time deposits.

The global financial institution said the Bangko Sentral ng Pilipinas (BSP) would likely retain its two-percent interest rate for the SDA, which is expected to shrink below the existing P1 trillion as banks wind down trust accounts loaded with SDAs as well as agency accounts.

Benchmark overnight reserve report rate is likewise forecast to hold fort at 3.5 percent.

“With an estimated 15 to 24 months of monetary policy transmission lag and 12-month average inflation at 3.1 percent, we believe the central bank (BSP) has enough scope to remain on hold,” Victorino said.

However, she likewise cautioned that there is high risk of a rate hike next year on upward inflation pressure on the back of higher liquidity.

“We expect BSP to maintain a wait-and-see approach and assess the impact of its SDA rate reduction cycle,” the ANZ analyst said, adding that a 25-basis point increase is likely in the second semester of 2014.

ANZ is the third largest bank by market capitalization in Australia.  It is serving approximately six million retail and commercial customers through a network of around 800 branches, 115 business centers, 2,700 ATMs and leading online and mobile banking applications.