THE economy may have slowed last year but growth was still strong enough to allow monetary authorities to keep interest rates higher for longer, analysts said.
Gross domestic product (GDP) growth was 5.6 percent last year, markedly lower than 2022's 7.6 percent and below the government's 6.0- to 7.0-percent target.
Rate hikes totaling 450 basis points (bps) since May 2022 were a factor in the slowdown as the Bangko Sentral ng Pilipinas (BSP) sought to tame surging inflation.
"The full year GDP performance, albeit lower than the government's ambitious target, will likely be viewed by the BSP as robust enough to delay interest rate cuts to the second half of the year," China Banking Corp. chief economist Domini Velasquez said.
Central bank Governor Eli Remolona Jr. has said that while rate cuts could start this year, these were unlikely to start anytime soon with inflation risks still tilted towards the upside.
Should intervention again be needed, he added that robust growth would support another rate hike.
The BSP's benchmark rate currently stands at 6.5 percent, the highest since 2007. The central bank's policymaking Monetary Board last raised the rate in October, via an off-cycle 25 bps, as inflation again started rising.
Consumer price growth finally returned to the 2.0- to 4.0- percent target in December and monetary authorities held fire during their last two meetings, saying they wanted to see how the rate hikes were working their way through the economy.
HSBC Global Research economist Aris Dacanay said that given last year's growth, which surpassed some consensus estimates, the BSP had room to implement further tightening should inflation go up anew.
"However, we don't think the fourth quarter 2023 print was high enough to warrant a rate hike in the February rate-setting meeting," he added. "We believe the BSP would keep its monetary stance unchanged at 6.50 percent."
Dacanay said the BSP was also likely to only start cutting once the US Federal Reserve does so. The US central bank on Wednesday again kept interest rates steady and indicated that a cut during its next meeting in March was unlikely.
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