The PHL growth forecast has been upgraded despite the risks

By Tobias Jared Thomas
And Abigail Marie P. Iraola, Researcher

The Philippine economy is expected to grow above 6% this year, according to revised estimates released by the ASEAN + 3 Macroeconomic Research Office (AMRO) and the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) on Tuesday.

However, the upgraded growth forecast is below the government’s target of 7-9% this year.

In its latest Regional Economic Outlook report, AMRO said the Philippines’ gross domestic product (GDP) will expand 6.5% this year, slightly higher than the 6.2% estimate given in January.

The UN ESCAP, on the other hand, says the Philippine GDP is expected to grow 6.3% this year, slightly better than the previous estimate of 6%.

In 2021 the economy grew by 5.7%.

For 2023, AMRO’s growth forecast for the Philippines is 6.5%, within the government’s target of 6-7%.

“This year, we expect growth to reach 6.5%, and this will be driven by recovery in public spending and private sector spending,” said AMRO Chief Economist Hoe Ee Khor in a Virtual Brit.Stayng “We expect personal spending to return very quickly when the economy recovers more fully.”

However, AMRO says the biggest threat to recovery in the Philippines is the potential resurgence of coronavirus infection. Health experts recently warned of an increase in the number of cases after the May election, with many vaccinated Filipinos who did not receive booster shots citing “reduced immunity.”

AMRO cited the company’s sovereignty as a risk to the banking sector, as well as increased capital flow instability due to tightening global policy.

Despite this, the growth rate in the Philippines is expected to exceed the Southeast Asian Nations (ASEAN) average of 5.1% and 5.2% in 2023. In ASEAN, the Philippines has the fastest GDP growth this year Together with Vietnam, and the second highest increase in 2023.

The growth outlook in the region is supported by the high vaccination rate, which allows many countries to remain open despite the increase in omicron.

“So our assessment is that until a more serious form of covid, which is resistant to the vaccine, emerges, economies will remain quite open and are expected to recover quite strongly this year,” Mr Khor said.

AMRO says the Russia-Ukraine war is a risk to the growth outlook due to the recurrence of global supply chain disruption due to the Covid-19 and the expected normalization of monetary policy in the United States.

“The ongoing Russia-Ukraine conflict is expected to have a limited impact on the region’s GDP growth in 2022 due to the small exposure to the two economies involved in the regional economic conflict. An escalation and prolongation of the conflict, however, will create a negative risk for growth, ”it added.

AMRO says Philippine inflation is expected to accelerate from 3.9% in 2021 to 4.1% in 2022. This is lower than the 4.3% inflation projection of Bangko Sentral ng Pilipinas (BSP), but above the 2-4% target. Inflation is expected to come down to 3.5% by 2023.

Mr Khor said the central bank’s policy rate was unlikely to be tightened any time soon, citing the negative output gap and general consumer demand. “We do not see an urgent need to raise policy rates.”

Mr Khorr said the central bank should start withdrawing some of its policy stimulus, “as the economy continues to gain traction and growth continues to recover.”

Higher growth
Meanwhile, UN ESCAP’s upgraded 6.3% growth forecast for the Philippines is the second highest in Southeast Asia this year after Vietnam’s 6.5%.

In a report titled Economic and Social Survey of Asia and the Pacific 2022: Building Forward Fairer, UNESCAP also projected 6.7% GDP growth for the Philippines in 2023.

Revised estimates are 5% above the UN ESCAP regional growth forecast this year and 5.2% in 2023.

“The slight upward correction for the Philippines is based on an assessment that easing restrictions and reopening borders will boost domestic demand, which will benefit the service sector,” said Hamza, director of UN ESCAP’s macroeconomic policy and financing for development. An email.

“When trying to understand the changes in the GDP forecasts for 2022 and 2023, it is important to understand and acknowledge the exact level of uncertainty in the economy,” Mr Malik said.

He noted that the Philippines had not fully recovered from the epidemic when the Russia-Ukraine war broke out in late February.

The reopening of borders around the world could benefit the economy, allowing more Filipinos to work abroad and sending more money that would support domestic spending, Mr Malik said.

On the other hand, revenue expenditure is expected to continue to support growth through large-scale infrastructure projects.

Meanwhile, UN ESCAP said that inflation in the Philippines is projected to average 3.3% this year from 4.5% in 2021. For 2023, inflation averaged 3%.

“Inflation was moderate in the first few months of 2022, but the recent rise in global oil and commodity prices due to the Russia-Ukraine conflict could increase price pressures. As long as inflation remains within the central bank’s target range, monetary policy will be tolerant to support recovery.” The owner says.

Risks to the Philippine growth outlook include new coronavirus variants, renewed lockdowns and slower export growth due to the ongoing Ukraine war, he added.