Nomura forecasts 6.8% GDP growth for Philippines

MANILA, Philippines — Japanese investment bank Nomura has raised its 2022 gross domestic product (GDP) growth forecast for the Philippines to 6.8 percent from the previous target of 6.5 percent as COVID cases start to ease.

In a report, Euben Paracuelles, chief ASEAN economist at Nomura, said the upward revision reflected the faster-than-expected expansion in the third and fourth quarters of last year.

“We raised slightly our GDP growth forecast for 2022, mainly reflecting stronger-than expected growth over the last two quarters,” Paracuelles said.

The Philippines emerged from the pandemic-induced recession that stretched through five quarters with a sustained GDP growth of 12 percent in the second quarter of last year, 6.9 percent in the third and 7.7 percent in the fourth quarter.

As a result, the economy grew by 5.6 percent for the whole of 2021, slightly exceeding the government’s five to 5.5 percent target and reversing the 9.6 percent contraction recorded in 2020.

Despite the upward revision, the new GDP growth target of Nomura is still below the target set by the Cabinet-level Development Budget Coordination Committee (DBCC) for this year.

“However, this is still below the government’s range of seven to nine percent, reflecting our view that still low vaccination rates and the risk of a re-acceleration in new COVID cases could hinder further reopening, which alongside limited fiscal support could weigh on growth,” Paracuelles said.

COVID infections soared to reach almost a daily record of 40,000 cases in January after the Christmas and New Year holiday with the emergence of the more contagious Omicron variant, prompting the government to impose a stricter Alert Level 3 in the National Capital Region (NCR) and nearby provinces.

The daily tally subsequently eased to below 5,000 cases, paving the way for the lowering of the restriction to Alert Level 2.

With the campaign for the national elections underway, Nomura sees the risk of higher infections despite the receding Omicron wave, similar to the experience of neighboring countries such as Thailand after mobility increased.

“The Omicron wave has eased, but with election campaigning underway, new COVID cases could re-accelerate amid still-low vaccination rates, hindering a further reopening,” Paracuelles said.

Around 54.6 percent of the population is fully vaccinated as of early February, with 7.3 percent receiving booster shots.

Nomura also raised its current account deficit forecast as oil prices are now seen hitting $88.4 per barrel and amid another record-high trade deficit in December.