Philippines likely to attain 2022 growth target

MANILA, Philippines — The Philippines is likely to achieve a faster gross domestic product (GDP) growth of 7.3 percent this year, well within the 6.5 to 7.5 percent target penned by economic managers.

In a report, Malaysian financial giant Maybank said the GDP growth of ASEAN-6 would pick up to 5.6 percent this year from 3.9 percent last year despite the fact that global growth is seen slowing to 2.9 percent from six percent.

In the case of the Philippines, the projected growth this year is faster than last year’s 5.7 percent when it exited the pandemic-induced recession in 2020.

The economy shrank by 9.6 percent in 2020 as strict COVID-19 quarantine and lockdown protocols stalled business activities.

The projection makes the Philippines the third fastest growing economy in the region after Vietnam’s and Malaysia’s eight percent.

The economy grew by 7.7 percent between January and September this year after a stronger-than-expected expansion of 7.6 percent in the third quarter despite the series of aggressive rate hikes delivered by the Bangko Sentral ng Pilipinas (BSP) to tame inflation and stabilize the peso.

The  Monetary Board raised key policy rates by 350 basis points this year that brought the benchmark interest rate to a 14-year high of 5.50 percent from an all-time low of two percent.

Inflation is seen peaking and breaching eight percent this month after accelerating to a 14-year high of eight percent in November from 7.7 percent in October.

For 2023, Maybank sees the GDP growth of the Philippines slowing to 5.5 percent, in tandem with that of ASEAN that is seen slowing to 4.3 percent from this year’s 5.6 percent.

This is lower than the revised six to seven percent GDP growth target set by the Cabinet level Development Budget Coordination Committee (DBCC) but would be the second fastest after Vietnam’s six percent.

“ASEAN is emerging as a defensive harbor against the backdrop of rising US interest rates and potential US or global recession,” Maybank said.

It pointed out that ASEAN would be cushioned by the reopening tailwinds, while China’s shift from “zero COVID” will be slow and incremental.

“Restrictions to mobility and travel will remain stringent for most of 2023. The real estate crisis will also dampen consumer spending and investment,” it added.

According to Maybank, ASEAN economies and markers may partially decouple from a US recession and emerge as a bright spot in the darkening clouds.

Maybank said the tailwinds from the reopening are dissipating but still not over and that intra-ASEAN trade is growing at over 30 percent, partially cushioning the slump in exports to the US, EU and China.

It added that the reconfiguration of manufacturing supply chains to ASEAN from China has increased foreign direct investments (FDIs) significantly and that capital flows from Greater China into ASEAN have been rising because of the US-China geopolitical rivalry, stricter national security regulations and divergent COVID strategies.