MANILA, Philippines—With political fever on and as government agencies fast-track projects ahead of the spending ban during campaign season for the 2022 elections, economists watching the Philippines have turned more bullish and jacked up their growth forecasts for this year and next year.
For its part, the Department of Finance (DOF) on Monday said sustained mass vaccination, reopening of more productive sectors from pandemic restrictions, and further opening of the economy to foreign investors would be key to bringing the Philippines’ annual gross domestic product (GDP) growth back to the “stellar” pre-pandemic average of above 6 percent.
The results of quarterly consensus survey by think tank Japan Center for Economic Research’s (JCER) on Asian economies released also on Monday (Dec. 20) showed the average 2021 GDP growth projection for the Philippines rose to 5.1 percent from 4.3 percent previously. The government now targets a faster 5-5.5 percent economic growth for this year.
But following the surprise 7.1-percent year-on-year third-quarter GDP growth, economists expect a slower 4.9-percent expansion during the current fourth quarter, also lower than their average forecast of 5.2 percent a quarter ago.
For 2022, economists projected GDP growth of 7.1 percent, up from 6.6 percent previously and within the government’s 7 to 9 percent goal for 2022.
Growth forecasts averaged 8.5 percent year-on-year for the first quarter of 2022, jumping from 5.9 percent previously; 7.6 percent for the second quarter of next year, inching up from 7.5 percent; and 8.4 percent for the third quarter.
“Among the five Asean countries, the Philippines received a considerable upward revision of 0.8 [percentage] points in 2021 and 0.5 points in 2022. Expectations are rising for increased spending ahead of the May 2022 presidential election,” JCER said.
The JCER report—which also covered Indonesia, Malaysia, Singapore and Thailand—showed the Philippines’ estimated 2021 growth rate would be Asean-5’s second-fastest, only exceeded by Singapore’s 6.8 percent.
GDP growth in 2023 was seen slowing to 5.9 percent, a higher forecast than 5.8 percent previously but below the government’s 6 to 7 percent target.
Still, the Philippines’ GDP growth in 2022 and 2023 would likely be the fastest across the five Asean countries in JCER’s poll, which also covered China and India.
The Philippine economy shrank the worst in the region in 2020 — its 9.6-percent GDP contraction last year was the worst recession post-war no thanks to one of the longest and most stringent COVID-19 lockdowns imposed by the government, which was expected to leave behind long-term socioeconomic scarring effects.
“Economists expect GDP levels to recover to pre-pandemic levels (2019) in Indonesia, Singapore and India in 2021, the Philippines and Malaysia in 2022, and Thailand in 2023,” JCER said.
The eight economists polled by JCER included Bank of the Philippine Islands (BPI) lead economist Emilio Neri Jr., Barclays regional economist Angela Hsieh, BDO Unibank chief market strategist Jonathan Ravelas, De La Salle University (DLSU) school of economics associate dean Mitzie Conchada, ING senior economist Nicholas Mapa, Metrobank research analyst Pauline Revillas, Nomura chief economist Euben Paracuelles, and UnionBank chief economist Carlo Asuncion.
For 2022, Conchada said “one of the things that we look forward to… is the favorable impact of the national elections.”
“We are hoping that the leaders who will be elected are reliable, honest, and can face the challenges head-on without compromising the morals of the people,” Conchada said.
Revillas expressed optimism as “household spending looks to be on a solid rebound as growth remained strong even amid the lockdowns imposed, elevated consumer prices, and high unemployment numbers.”
“The continued rebound in investment spending, alongside high government spending (because of election-related expenditures), would also put the economy on a more solid footing as we enter 2022,” Revillas said.
Next year’s national budget will be a record P5.02 trillion, with an also record-high P1.27 trillion or 5.9 percent of GDP to be spent on infrastructure development.
Candidates for national and local elective posts were also expected to spend billions of pesos to attract votes, boosting private consumption, which accounted for about a fourth of the Philippines’ yearly GDP growth.
In an economic bulletin, Finance Undersecretary Gil Beltran, also DOF chief economist, pointed to higher-than-expected rebound of GDP, foreign trade, as well as foreign direct investment (FDI) numbers to date.
“The Philippines is on its way to recover lost ground,” he said.
“The Philippines’ total merchandise trade in the first three quarters of the year is 125.1-percent of its pre-pandemic level,” Beltran said.
“Such recovery in external trade is broadly in line with similarly rated peers and Asean neighbors,” he said.
“The Philippines managed to attract nearly $4.3 billion in FDI in the first half of 2021, 40-percent higher than the level in the same period of 2020 and nearly half the full-year pre-pandemic level,” Beltran noted.
For Beltran, “the arrival of much-needed vaccines and the efficient administration thereof should be able to help in the safe and gradual reopening of the economy, bring back investor confidence, and speed up recovery.”
He said the passage of important reform bills would also help attract more investments, generate more jobs, speed up recovery and revive “stellar” growth rate of more than 6 percent.
These measures included proposed amendments to the Public Service Act, Foreign Investment Act and Retail Trade Liberalization Act, Beltran said.
Beltran, however, cautioned that “the country needs to stay alert and not let its guard down — already, the newly identified Omicron variant is threatening to dampen the merry mood of the Yuletide season — lest hopes be dashed again as the previous scenes replay where the situation would appear to get better before things got much worse.”
“Living prudently with the virus bears in mind that it ain’t over ’til it’s over. Otherwise, it will be quarantines redux and the future is exactly what it used to be,” Beltran warned.