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A strong rebound in domestic demand with the easing of COVID-19 mobility restrictions in the country will support robust growth for the Philippine economy in 2022, despite higher inflation due to global and local price pressures, according to a report released today by the Asian Development Bank (ADB).
The Philippines’ gross domestic product (GDP) will grow 6.5% in 2022, the same as forecast in July but up from the bank’s April forecast of 6.0%, according to Asian Development Outlook (ADO) 2022 Update. The growth projection for 2023 is kept at 6.3% as monetary policy tightening and accelerating inflation both crimp domestic demand.
Inflation is now expected to quicken to 5.3% in 2022, up from the July forecast of 4.9% and 4.2% in the April ADO 2022 report, underpinned by sharp upward shocks to global energy and commodity prices. The negative impact of natural disasters on domestic agricultural supply will likely lead to higher food prices until the end of the year. The inflation forecast for 2023 is kept at 4.3% since the return to steady economic growth will keep inflation relatively stable, and with energy prices likely to decelerate.
“The normalization of socioeconomic activity will usher the Philippine economy to a steady, pre-pandemic pace of expansion,” said ADB Philippines Country Director Kelly Bird. “The recovery in tourism and private investments, coupled with sustained public spending on large infrastructure projects and remittances from overseas Filipinos, will bolster the country’s economic recovery this year.”
However, according to the report, downside risks to the growth outlook could come from a sharper slowdown in major advanced economies, heightened geopolitical tensions, and possible sustained elevated global commodity prices due to the Russian invasion of Ukraine.
Spending on recreation, travel, and restaurants bounced back in the first half of 2022, with household consumption rising 9.3%, from 0.9% in the first semester of 2021. It was the most significant contributor to GDP growth in the period.
Services output grew 8.7% in the first half, with a broad-based expansion noted across the sector. This contributed to a steady increase in overall employment, with an additional 5.7 million jobs generated from July 2021 to July 2022, two-thirds of which were in services, mainly in wholesale and retail trade.
Infrastructure upgrades, including for bridges, expressways, ports, and railroads, continue to be one of the top priorities of the government. Public spending on infrastructure this year and next is planned at up to 6.0% of GDP to help improve the country’s business environment and competitiveness.
Among the government’s flagship projects supported by ADB are the Malolos Clark Railway Project and South Commuter Railway Project, both part of the North–South Commuter Railway System, which will provide safe, fast, and efficient transportation to link Metro Manila to northern and southern Luzon provinces. Construction of the Malolos Clark project started during the pandemic, while civil works contracts for the South Commuter project are expected to be awarded soon.
ADB is also financing the EDSA Greenways Project, which aims to improve the pedestrian experience along the main EDSA thoroughfare in the capital and the Metro Manila Bridges Project, which seeks to help solve traffic congestion in the metropolis.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.