Faster economic growth seen for Philippines until 2022

MANILA, Philippines — The Philippines is expected to record strong growth until next year as the economy shows “impressive resilience,” with a ramped-up vaccination drive to counter the threats of new COVID-19 variants, the Asian Development Bank (ADB) said.

In its Asian Development Outlook 2021 supplement released yesterday, the Manila-based multilateral lender joined local and international think tanks and banks in raising their optimism on the country’s growth trajectory this year and in 2022.

ADB hiked its 2021 gross domestic product (GDP) forecast for the country to 5.1 percent from its 4.5 percent projection in September.

The bank also raised its 2022 expectations at six percent from the earlier 5.5 percent.

This even as GDP outlook for Southeast Asia has been slightly reduced to three percent following the recent tightening of mobility restrictions to curb the spread of the highly transmissible Delta variant.

ADB’s latest forecast now falls within the government’s revised target GDP growth of four to five percent for the whole year. The economy is coming from a 9.6 percent contraction last year.

ADB’s improved projection for 2021 came after the stronger than expected economic performance in the third quarter at 7.1 percent, despite the reimposition of lockdown measures during the period.

Growth in the first three quarters of the year is at 4.9 percent, reversing the 10.1 percent contraction in the same period last year.

ADB country director Kelly Bird maintained that the Philippines economy has shown “impressive resilience.”

“Growth momentum has clearly picked up on the back of the government’s vigorous drive to vaccinate Filipinos against COVID-19. Public spending on infrastructure and continued vaccination of the population will help the country further accelerate its recovery in 2022,” Bird said.

Over the last three quarters, household consumption and investment drove growth.

Private investment also bounced back while public construction growth accelerated in line with the country’s Build Build Build infrastructure program.

On the supply side, industry and services both contributed to growth in the first three quarters, but agriculture contracted as pork production fell.

ADB said consumer and business confidence improved steadily in the last quarter of the year as the vaccination program accelerated, contributing to the sharp drop in daily COVID-19 cases.

This allowed the government to downgrade the alert level status in Metro Manila and the rest of the country and reopen businesses and other economic activities.

On the other hand, ADB raised its inflation outlook for the Philippines this year and next.

The regional lender expects inflation to settle at 4.4 percent this year, from its earlier forecast of 4.1 percent, mainly due to rising fuel prices.

This is just slightly above the Bangko Sentral ng Pilipinas’ target of 4.3 percent. Year to date inflation is already at 4.5 percent.

Inflation is seen cooling to 3.7 percent by 2022 as base effects fade.

“Inflation in Southeast Asia is expected to remain subdued in 2021 despite inflationary pressure starting to rise in the Philippines, Singapore and Thailand as economic reopening spurs demand,” ADB said.