Philippines on track To Economic Recovery According to ADB

With the ease of COVID-19 restrictions, the Philippines is on track toward economic recovery. However, the country’s growth may fall short of government targets as risks persist due to global tensions.

According to the Asian Development Banks’ 2022 Outlook, the Philippine economy may grow by 6% this year and accelerate to 6.3% in 2023. ADB further stated that its GDP forecast for the country remains the same.

The 6% growth is an improvement on 2021’s 5.6% growth but still falls short of the 9% target set by President Duterte’s economic team. This year, the ADB said that recovery would be aided mainly by the easing restrictions caused by a drop in COVD cases, as this will strengthen domestic investment and consumption.

“Nearly all indicators point to higher growth for the Philippines this year and in 2023, barring the impact of external factors from geopolitical tensions that may dampen growth globally, including in the country’s key export markets Europe and the US,” ADB country director Kelly Bird said.

Bird emphasized that the economic risks stem from the unpredictable nature of global events, with the virus still present and Russia invading Ukraine.

“Heightened and extended geopolitical tensions will dampen global growth, including in advanced economies, particularly Europe and the US, which are among the Philippines’ key export markets,” ADB said.

Furthermore, ADB has increased its inflation predictions for the Philippines as it expects inflation to settle at 4.2% in 2022, as opposed to its earlier forecast of 3.7%.

“This is mainly on pressure from higher global oil and commodity prices. Inflation is expected to decelerate to 3.5 percent in 2023 as global commodity prices moderate,” ADB said.

“Higher oil prices this year will also drive up import costs. Growth in merchandise exports will be moderate compared with imports. Rising remittances and services exports, including business processing outsourcing and tourism receipts, will help trim the current account deficit,” it said.

Given the predicted rise in inflation, the bank has also stated that public investments and infrastructure projects will provide a boost to the country’s GDP. It then added that election-related spending would also bring a moderate increase in aggregate demand.

“Recent upticks in private investment and the passage of policy reform measures to ease rules on foreign equity ownership and lower the minimum paid-up capital of foreign retailers will support economic growth,” Bird said.

“As economic recovery accelerates, revenue will continue to pick up. The government’s decision to maintain excise taxes on petroleum products, despite calls to suspend them to temper spikes in pump prices, will help sustain revenue,” the ADB said.

Source: Philstar