What the year 2022 will bring?

Predictions tends to be more dramatic and radical as compared to forecasts. They also tend to have less empirical support and basis. Forecasts, on the other hand, are grounded on recent historical data and emerging trends extrapolated into the coming years. Forecasts have a higher probability of happening than predictions, even considering unforeseen or “black swan” events. So, we are making a forecast of the most likely possible socio-economic events and results that may happen in 2022 in the Philippines.

The COVID-19 pandemic that ravaged the economy and Philippine society in 2020 and 2021 had to be one of the worst years for the Philippines, comparable to the World War II and the Marcos martial law years. The contraction of the economy/GDP in double digits were approximately the same, and similarly the suffering of the people. Maybe, the only difference is that the war and martial law were man-made, while the pandemic was caused by a virus, unless it is proven that the pandemic was a China-made virus, and that our government really failed in the pandemic responses.

For the Philippine economy, we have good news and bad news. The good news is that the economy will grow in 2022. The bad news is that it will grow slowly and will only reach the size/magnitude of 2019 after the first quarter 2023. In 2020, Philippine GDP shrunk by 18% and grew by 7% in 2021. So, we need to grow by 11% in 2022 to recover lost ground. But remember that the base amounts in 2020 and 2021 were lower than the base amount in 2018, therefore we need an extra quarter to reach the 2019 GDP of P19 trillion ($377 billion). If the Omicron variant is really mild, our economy will grow at 9%, but if it is as virulent as Delta, then we are looking only at a 5% to 7% GDP growth for 2022.

In the last quarter of 2021, the manufacturing index which measures the increase in industrial production was already positive up to December. The Philippine stock market were increasing prices and volumes, with the PSE Index hitting 7,400. These are good leading indicators which if maintained in the first quarter of 2022 bodes well for the rest of the year. Exports, BPO revenues, and OFW remittances may hold or increase from the 2021 level, jumpstarting consumer expenditures which will a plus to the economy. Reconstruction spending in the provinces affected by typhoon Odette and election spending for the May 2022 election will be boosters which may add 1% to the GDP growth for 2022. Inflation, unemployment, and poverty level will likely be like in 2021.

The possible headwinds/obstacles to this moderate GDP growth will be another COVID-19 variant which will further slow down an already anemic world trade and economic growth. Even if the Philippine economy has only an 18% world trade component in its GDP, a reduction in the world’s GDP and trade will negatively affect our economic revival. The other major spoiler would be our political condition. In these last few months of the Duterte administration, even with the manageable fiscal and monetary conditions, government actions have been wanting. Implementation of policies and programs are slow and graft-ridden. Too much politicking and protection of vested interests.

The conduct and the results of the coming May 2022 election will be a plus or minus on our economy. A tainted/manipulated election exercise, will be a domestic and foreign investment dampener and will zap 1% to 2% of GDP growth. Electing an unqualified and tainted president who may bring back the cronyism and abuses of the martial law years will be another minus. It would really be very hard to answer foreign investors’ question, why the family that was ousted by People Power 35 years ago was brought back to power.