Economic team turns more optimistic on Philippines growth this year  

MANILA, Philippines — The country’s economic managers have become more bullish on this year’s growth performance following a surprising third quarter even amid soaring commodity prices, depreciating currency and high interest rates, all due to various external headwinds.

Budget Secretary Amenah Pangandaman said that the Cabinet-level Development Budget Coordination Committee (DBCC) is inclined to raise its gross domestic product (GDP) target for 2022.

“I think so, yes [it will be revised upward]. With the numbers we have now and everything is open, it is likely,” Pangandaman said.

Such optimism from the economic team stemmed after GDP grew 7.6 percent in the third quarter, effectively bringing the year-to-date average expansion to 7.7 percent.

Such a rate now falls above the 6.5 to 7.5 percent full-year assumption set by the DBCC in August. The economy only needs to grow by 3.3 to 6.9 percent in the last quarter to hit the original target.

Pangandaman said the DBCC, which she chairs, is set to meet next month to discuss and revisit economic targets.

Newly-confirmed Finance Secretary Benjamin Diokno also expressed optimism on exceeding this year’s growth forecast despite the impact of elevated inflation.

“We don’t want to downplay the current war and elevated inflation but oil prices are starting to go down and the peso is stabilizing,” Diokno said.

While the GDP target has yet to be revised, economists already said hiking this year’s growth goal is just reasonable.

UnionBank chief economist Ruben Carlo Asuncion emphasized that optics of continuous mobility and the bump of domestic consumption due to seasonal reasons bodes well for sustained domestic demand growth until the end of the year, at least.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that the absence of lockdowns and low base effects would likely magnify economic growth in the last quarter.

“This is also the first holiday season without restrictions since the pandemic started with some pent up demand,” Ricafort said.

“There are still more upside surprises despite higher prices as being overshadowed by the economic reopening narrative, pent up demand and revenge spending and consumption,” Ricafort added.

Reopening boosts consumption

During the third quarter, household consumption and investment drove the growth, signifying that Filipino families are close to returning to their pre-COVID lives.

The economy also benefited from the resumption of face-to-face classes, which boosted consumption among Filipinos.

Ricafort and Asuncion are looking at full year GDP growth of 7.8 percent to as much as eight percent.

Nonetheless, Asuncion still warned of risks including the continued aggressive move of the US Federal Reserve that delivered four consecutive 75-basis-point rate hikes over the past months.

Asuncion argued that once the impact of these rate hikes start kicking in, it would now be challenging to talk about robust economic growth as these would soften economic expansion.

“I think, for until the end of the year, it is still to proceed with caution. But once we see inflation, not just globally but most especially locally, reach its peak and an improvement in geo-political issues come about, this would indeed be a better situation for economic growth and recovery,” Asuncion said.

High inflationa burden

With the surprise GDP growth, even Socioeconomic Planning Secretary Arsenio Balisacan maintained that the country is still facing a considerable burden in the form of high inflation due to heightened external risks and the brunt of recent typhoons.

“Achieving economic growth is a necessary but not sufficient condition to achieve our greater goal, which is to reinvigorate job creation and reduce poverty,” Balisacan said.

“The administration’s objective is to reduce poverty to single-digit levels, which requires managing inflation,” Balisacan added.

Nonetheless, Pangandaman emphasized that the economic team hopes to sustain such growth by taking advantage of economic opportunities and targeted programs.

“This confirms that the outlook for the economy is positive. We continue to support this with a firm fiscal consolidation plan. We can move forward with confidence that the Philippine economy is sound and far from recession,” Pangandaman said.