Philippines return to pre-pandemic level seen by mid-year

MANILA, Philippines — Domestic economic activity is projected to return to pre-pandemic level by the middle of this year after a stronger-than-expected first quarter gross domestic product (GDP) growth of 8.3 percent, according to the Bangko Sentral ng Pilipinas.

BSP managing director Zeno Ronald Abenoja said the strong growth in the first quarter is likely to be sustained with the further reopening of the economy from strict COVID quarantine and lockdown protocols.

“Domestic growth has seemed to remain robust in the succeeding quarters in view of the implementation of reforms to boost investment and credit activities, as well as the looser mobility restrictions amid continued widespread deployment of vaccines and booster shots,” Abenoja said.

He said the eventual reopening of the global economy as restrictions continue to ease and the labor market conditions improving further are seen to bolster domestic recovery through increased exports and remittances.

The Philippines emerged from the pandemic-induced recession that stretched through five quarters, with a GDP expansion of 5.7 percent last year, reversing the 9.6 percent contraction recorded in 2020.

The Cabinet-level Development Budget Coordination Committee (DBCC) is looking at a faster GDP growth of between seven and nine percent for this year before stabilizing at a six to seven percent range over the next few years.

Abenoja said the country’s output gap – the actual economic output during the COVID crisis versus the maximum pre-pandemic potential – closed in the first quarter.

According to estimates of the Asian Development Bank (ADB), the actual output gap of the Philippines at 15.7 percent, below what would have been the GDP figure without the pandemic, was the highest among member countries of the Association of Southeast Asian Nations (ASEAN).

“Looking at the output data, it is now estimated to have closed in the first quarter of this year and seem to remain broadly neutral during the rest of the year as the economic recovery continues to gain traction,” Abenoja said.

He said the country’s potential output is expected to increase pace with actual output amid the continued reopening of the economy, improvements in employment conditions, as well as the continued growth in external demand.

During the webinar of the ADB Institute, BSP Governor Benjamin Diokno said that economic recovery came sooner than expected for the Philippines due to the country’s massive reforms and strong macroeconomic fundamentals.

“The economy grew by 8.3 percent in Q1. We expect the economy to grow much faster in the second quarter, making the growth target for this year of seven to nine percent doable,” Diokno said.

The BSP chief pointed out that employment is nearing its pre-pandemic rate as the unemployment rate is down to just 5.8 percent in March from a peak of 17.6 percent in April 2020.

Diokno said the Purchasing Managers Index hit a four-year high of 54.3 in April, reflecting a strong rebound in the country’s manufacturing activity.

While the Philippines is on track in achieving full economic recovery in the near term, Diokno stressed the need to work together to overcome current and emerging challenges, including the impact of Russia’s ongoing invasion of Ukraine.

“Now more than ever, we must put a premium on stronger international cooperation to achieve our vision of a green, resilient, and inclusive global economy,” the BSP chief said.