MANILA, Philippines — The central bank chief expects gross domestic product (GDP) to expand at least seven percent in the fourth quarter, driving full year growth to over five percent after slumping last year due to the pandemic.
In his weekly virtual press conference, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the projected growth would exceed the four to five percent growth target set by the inter-agency Development Budget Coordination Committee (DBCC) for 2021.
“Our revised forecast for this year is four to five percent. I think it will be more than that, it will be more than five percent this year,” Diokno said.
The Philippines emerged from the pandemic-induced recession that stretched five quarters after booking back-to-back GDP growth of 12 percent in the second quarter and 7.1 percent in the third quarter.
The GDP expansion averaged 4.9 percent from January to September this year after shrinking by a record 9.6 percent last year as the economy stalled due to the pandemic.
“Because right now, the year-to-date is 4.9 percent, so it stands to reason that the fourth quarter will be at least seven percent,” Diokno said.
He said the growth momentum would carry over the next three years, with a GDP growth of seven to nine percent in 2022 before normalizing at a range of six to seven percent in 2023 and 2024.
The BSP has maintained an accommodative monetary policy stance, keeping interest rates at record lows over the last eight rate setting policy meetings since November last year, to allow the economy to fully recover from the impact of the pandemic.
According to the BSP chief, conditions contributing to supply chain issues may diminish as some economies return gradually to their pre-pandemic phase.
“Amid a challenging global economic environment, the BSP shall continue to be vigilant in monitoring the potential inflationary risks that may arise from supply shortages while providing the appropriate policy support to help ensure a sustainable path to economic recovery,” Diokno said.
The multidimensional disruptions in global supply chains have reverberated in both advanced economies and their trading partners as input linkages in global value chains created mechanisms in the transmission of price and output shocks.
Country-specific supply chain issues also exacerbate the adverse impact of global supply chain disruptions. Some of these issues include backlogs in shipping ports due to driver shortages, the reimposition of lockdowns as well as power shortages.
In the case of the Philippines, the backward linkages of local industries to global value chains suggest that disrupted cross-border flows of production inputs could temper output capacity in the near term.
Recent reports published by the Philippine Institute for Supply Management and IHS Markit indicate that domestic businesses continued to report contracting output and higher input prices as transportation constraints and delays had an effect on suppliers’ delivery performance.
As a result, higher global non-oil prices, along with the possibility of prolonged shortages in select food commodities, could pose an upside risk to domestic inflation.
In addition, the emergence of the Omicron variant of COVID-19 may further prolong the supply chain disruptions as some governments reimpose mobility restrictions to curb the spread of infections.
However, as the economy is still in the nascent recovery phase, the pass-through to domestic prices appears limited as indicated by the path of underlying inflation.