‘Philippines back to pre-COVID-19 growth in H2’

MANILA, Philippines — DBS Bank Ltd. expects the Philippines to retrace to pre-COVID levels in terms of economic growth in the second half of the year as the pandemic situation has come under control.

In its latest ASEAN-6 Chartbook titled “Transiting to an Endemic State,” the Singaporean bank said the country’s quarterly real gross domestic product (GDP) growth would retrace to its pre-COVID level, “driven by reopening gains, despite rising inflationary pressures from commodities undercutting consumers’ real purchasing power.”

DBS sees the GDP growth of the Philippines accelerating to 6.5 percent this year from the revised 5.7 percent last year. This was a complete reversal of the 9.6 percent contraction in 2020 as the economy stalled due to strict COVID-19 quarantine and lockdown measures.

“Philippines’ COVID-19 situation has come under control, with economically important Metro Manila and more areas placed on the least restrictive Alert Level 1. Reopening gains will propel economic growth in 2022,” DBS said.

The bank said households’ dynamics appear to have held up well despite the Omicron wave.

Philippine economic managers see a faster GDP growth of seven to nine percent this year amid the further reopening of the economy after the National Capital Region (NCR) and nearby provinces were placed under Alert Level 3 in January as COVID-19 cases surged due to the more contagious Omicron variant.

DBS said the unemployment rate fell slightly early this year versus the rise seen during the Delta surge.

It added consumption loan growth has bottomed out.

“Forward-looking business expectations for the next quarter as of first quarter of 2022 are at their most optimistic levels in many years. The buoyant outlook bodes well for the recovery, despite current figures pulling back on Omicron fear,” DBS said.

According to DBS, rising vaccinations have raised virus resiliency, with tough lockdowns less likely.

“Domestic virus restrictions have been eased and international borders are reopening,” the bank added.

DBS said a full revival of tourism remains elusive given the reliance on Chinese tourists.

The start of the tightening cycle by the US Federal Reserve continues to serve as a headwind to the global economy.

“Economic activity supported by domestic demand should normalize to pre-pandemic levels, but the external environment is turning more challenging amid the Fed’s tightening and geopolitics,” DBS said.