Investment banking giant Goldman Sachs has again upped its 2022 growth forecast for the Philippines to 7.9 percent following the stronger-than-expected output ending 2021.
While Goldman Sachs Economics Research’s updated projection improved from 7.7 percent previously, it said this year’s gross domestic product (GDP) growth rate would have been an even faster 8.5 percent if not for the current surge in cases and stricter movement restrictions caused by COVID-19’s Omicron strain. The government is targeting 7 to 9 percent economic growth in 2022.
“Factoring in the upside surprise to fourth quarter 2021 GDP would mechanically push our 2022 GDP growth forecasts higher to 8.5 percent. However, the ongoing Omicron wave has pushed our GS effective lockdown index higher than expected in recent weeks, and back up to levels last seen in the third quarter of 2021, during the Delta wave,” the bank said in a Jan. 27 report.
GDP climbed 7.7 percent year-on-year and 3.1-percent quarter-on-quarter during the October-to-December 2021 period, exceeding expectations, due to what Goldman Sachs described as “reopening impulse” amid the Christmas holiday season, which also saw more economic sectors operating.
Three-fourths of GDP
On the average, private sector and household consumption account for about three-fourths of economic output.
GDP or the value of goods and services produced in the country grew by an average of 5.6 percent in 2021, above the government’s 5 to 5.5 percent goal.
But Metro Manila and neighboring provinces comprising about half of GDP moved to tighter alert level 3 restrictions this month as infections reached record highs due to the dominant, more contagious COVID-19 variant. The higher alert level costs the economy at least P3 billion in foregone output weekly.
Socioeconomic Planning Secretary Karl Kendrick Chua on Thursday said the main risk to economic growth this year was “any unknown variant of the virus.”
Goldman Sachs said “we expect certain sectors such as high-contact services to give back some of their fourth quarter 2021 gains in the first quarter” of 2021.
Its GS effective lockdown index last Jan. 24 showed restrictions in the Philippines tightened by nearly four points during the past week, only exceeded by stricter curbs imposed in Hong Kong, India, Israel, Australia and Mexico.
As such, Goldman Sachs now expects first-quarter GDP to match output in the fourth quarter of 2021, or flat quarter-on-quarter growth. It previously projected a 0.7-percent quarter-on-quarter rise in January-to-March 2022 GDP.
“Factoring in this lower first quarter growth forecast, a bigger second quarter growth rebound (2.6 percent quarter-on-quarter, from 2.3 percent quarter-on-quarter previously) and the fourth quarter 2021 GDP growth surprise, our 2022 real GDP growth forecast rises to 7.9 percent, from 7.7 percent previously,” Goldman Sachs said.