ADB upgrades 2022 growth forecast for Philippines to 7.4%

Manila-based multilateral lender Asian Development Bank (ADB) has raised its economic growth projection for the Philippines this year following the economy’s stronger-than-expected performance in the third quarter.

In its Asian Development Outlook 2022 December supplement released Wednesday, the ADB said the Philippine economy will grow faster than earlier expected at 7.4% this year.

The latest growth forecast is an upgrade from the 6.5% projection that the lender reported in the September edition of its Asian Development Outlook 2022. 

“The 2022 growth forecast for the Philippines is revised up after domestic demand spurred third quarter growth above expectations,” the ADB said.

The economy as measured by gross domestic product (GDP) — the total value of goods and services produced in a specific period — grew by 7.6% during the July to September period, faster than the upwardly adjusted 7.5% GDP growth in the second quarter of 2022.

This is also higher than the 7% GDP growth posted in the third quarter of 2021.

“GDP grew by 7.7% in the first three quarters of this year, driven by robust private consumption and investment and by sustained public infrastructure spending. Rising employment, tourism recovery, expanding production and retail sales, and public investment will continue to support growth,” the lender said.

The ADB, however, revised downward its growth outlook for the country next year to 6% from 6.3% “to accommodate monetary tightening, a sharper growth slowdown in the advanced economies, and continuing uncertainty arising from the Russian invasion of Ukraine.”

The bank said upward pressures on commodity prices are expected to be sustained in 2023 with continued uncertainty arising from the Russian invasion of Ukraine.

Nonetheless, ADB Philippines Country Director Kelly Bird said, “The Philippine economy has shown strong underlying growth momentum and  resilience in 2022 and this is expected to continue in 2023, with GDP growth converging towards its longer term growth rate of about 6%.”

“There are downside risks to growth in 2023, including inflation stickiness, further increases in interest rates, and a sharper than expected slowdown in GDP growth in advanced countries,” Bird said.

Similarly, Marcos administration’s economic managers downgraded its growth outlook for the coming year, citing external headwinds such as the slowdown in major advanced economies.

The Development Budget Coordination Committee is expecting economic growth between 6.0% to 7.0% in 2023, lower than the earlier projected 6.5% to 8.0%.

The DBCC maintained its forecast range of 6.5% to 7.5% for 2022, with the third-quarter growth recorded at 7.6%.

The ADB noted that the Philippines will be at the high end of the range as compared with those of its Southeast Asian neighbors.

The 2022 growth forecast for the region was raised to 5.5% from the previous 5.1% despite the overall dimmed outlook for Asia and the Pacific, according to the ADB report.

GDP growth in Southeast Asia is expected to slow to 4.7% in 2023.

Meanwhile, inflation in the country is expected to quicken to 5.7% this year from the previous forecast of 5.3% before slowing down in 2023, with the forecast for next year maintained at 4.3%. 

On the sidelines of a press briefing in Mandaluyong City, Bird said the lower inflation forecast next year was due to the expectation that the monetary policy tightening implemented by the US and other economies “will be felt next year.”

The impact of interest rate hikes were seen to dampen demand and eventually slowdown the pace in the increase of consumer prices, the ADB official said.

Interest rates or monetary policy are among the tools used by central banks to stabilize inflation through controlling money supply by raising borrowing costs.

Higher borrowing costs could make consumers and businesses spend less, therefore reducing economic activity or lowering demand and eventually lowering prices. — RSJ, GMA Integrated News