Philippines faces headwinds despite strong Q1 GDP

MANILA, Philippines — The Philippines may have recorded a stronger-than-expected first quarter performance, but headwinds remain that would likely impact growth in the near term.

In its weekly economic preview, New York-based intelligence firm S&P Global said Asia-Pacific economies, including the Philippines, are still facing a combination of challenges to their recovery.

In the Philippines, S&P Global Market Intelligence chief economist for Asia-Pacific Rajiv Biswas said both manufacturing input and output price inflation remain elevated.

He noted that the rates of increase are easing only slightly from the record highs in the past months.

“The Bangko Sentral ng Pilipinas (BSP) is facing escalating headline inflation pressures driven by rising energy and food prices,” Biswas said.

S&P also warned of the disruptions to economic activity in China that have resulted in a significant slowdown in both manufacturing and services output of the Asian country.

Such a development has broader transmission effects throughout the region, as China accounts for over half of Asia-Pacific GDP and is a key export market for many economies.

Latest data showed that China was the top export destination for the Philippines in March, with $1.18 billion or 16.5 percent of total exports for the month.

Biswas sees further headwinds from higher world prices for a wide range of mineral and agricultural commodities due to disruptions caused by the Russia-Ukraine war and related sanctions on Russia.

This has resulted in surging oil and food prices that contribute to rising inflation pressures for many economies including the Philippines.

“While Asia-Pacific has been relatively resilient to initial shocks, the duration and potential further escalation of the war create considerable uncertainties for the near-term outlook,” Biswas said.

“While the base case scenario is for continued resilient growth in the region in 2022, there are still considerable downside risks to the global and regional outlook from China’s slowdown and rising global inflation pressures. The war also remains an important downside risk, with potential for further dangerous escalation of the geopolitical confrontation between military powers in Europe,” he said.