GDP to grow by 5.5% — GlobalSource

By Luz Wendy T. Noble, Reporter

THE PHILIPPINE ECONOMY will probably grow faster than expected this year, but elections next year and the growing inequality are risks to recovery, according to GlobalSource Partners, Inc.

The research consultant expects economic output to expand by 5.5% this year and in 2022, faster than the 3.5% estimate it gave in August. It is also better than the government’s 4-5% goal.

“We expect the unevenness in growth across income groups and industries reflecting firm and labor market scarring to continue and weigh on activity further out,” GlobalSource analysts Romeo L. Bernardo and Maria Christine Tang said in a report on Monday.

It would probably take until late 2022 for economic growth to go back to its pre-pandemic level, they added.

The latest forecasts presume that current vaccines will protect Filipinos from the Omicron coronavirus variant from South Africa, which scientists have said appeared to spread more than twice as quickly as Delta.

Elections for president and vice-president down to mayors must also be credible, the US-based consultancy said.

The high vaccination coverage in Metro Manila, the center of Philippine economic activity, would work to its advantage, it added.

More than nine million Filipinos in the capital region have been fully vaccinated against the coronavirus, according to data from the Department of Health.

“In this environment, we anticipate sustained growth in business process outsourcing, digital transformation and the resilience of remittances to support the economy’s recovery,” GlobalSource said.

But some provinces continue to have low vaccination rates. The Southeast Asian nation has one of the lowest vaccination rates, with just 41% of the population inoculated against the coronavirus.

The government seeks to fully vaccinate 54 million Filipinos by yearend.

GlobalSource expects Philippine economic growth to stay at 5.5% by 2022, which is below the state’s 7-9% target.

“There will be more uncertainty about sources of growth as poll-related spending disappears by midyear and focus shifts to questions of policy continuity under the new administration,” it added.

The economy expanded by 7.1% year on year in the third quarter, bringing the nine-month growth to 4.9%.

Gross domestic product (GDP) shrank by 9.6% last year, one of the worst in Asia and the Philippines’ deepest recession since World War II.

Meanwhile, GlobalSource expects inflation to hit 4.5% this year before easing to 3.5% next year.

It said the central bank would probably continue to support the recovery even as other central banks like the US Federal Reserve have started to reconsider their loose monetary policy.

“Comparing progress in economic recovery and health management at this time, we do not think that the Bangko Sentral ng Pilipinas (BSP) needs to follow the US lockstep, especially since the economy’s two growth engines, remittances and BPOs exports, will benefit from a weaker peso,” the consultancy said.

“However, depending on local growth outcomes and global financial market conditions at that future point, the BSP may also decide to take preemptive action and avoid what financial markets seem to fear, like belated, aggressive policy rate hikes,” it added.