The Philippines' outperforming economy strengthens the case for a rate hike.

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In the first quarter, the Philippine economy outperformed expectations, strengthening the case for the central bank to shift its focus to combating one of Southeast Asia's fastest inflation rates.

The Philippine Statistics Authority reported Thursday that GDP increased 8.3 percent year on year in the three months through March, compared to the median estimate of a 6.8 percent increase in a Bloomberg survey. In comparison, the same quarter in 2021 saw a revised 3.8 percent contraction.

A briefing by Economic Planning Secretary Karl Chua stated that the Philippine economy is ready for whatever storms may come.

Many analysts, notably Goldman Sachs Group Inc., urged the Bangko Sentral ng Pilipinas to hike borrowing prices as global and regional peers sought to contain pricing pressures sparked by the European war. The country already has the second highest inflation rate in Southeast Asia, and the prognosis is bleak due to Chinese trade restrictions.

ING Groep NV senior economist Nicholas Mapa remarked, The notion that the economy is in need of help may no longer hold water. BSP must raise rates next week or risk falling farther behind regional central banks due to a strong economy and above-target inflation.

When compared to the previous quarter, private consumption and investment grew, but government spending shrank. Ferdinand Marcos Jr. will have more time to focus on jobs, food and energy prices, and infrastructure projects after May 9's elections because of this.

Policymakers in the country have stated that GDP growth must be at least 6% for the next five to six years in order to aid in debt reduction. Policymakers from India to South Korea have expressed worry that rising prices could pose a greater threat to economic growth by reducing household disposable incomes, which in turn would reduce economic demand. On May 19, the Bank of the Philippines (BSP) is scheduled to review monetary policy.

The larger-than-expected reopening rebound in the first quarter raises Goldman economists Jonathan Sequeira and Rina Jio's annual 2022 GDP growth forecast to 7.1 percent, up from 6.7 percent previously.At their meeting next week, they expect the BSP to issue its first 25 basis-point policy rate hike.

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