The Philippines’ economic growth this year may be tempered by uncertainties wrought by the forthcoming presidential elections and lingering risks from the infectious COVID-19 disease, economists said.
“Within Asean, the Philippines’ rapid virus case surge and tough mobility restrictions in early 2022 strengthen our existing view for the archipelago to remain a regional underperformer. Real GDP (gross domestic product) will see a slower return to prepandemic levels in the second half of 2022,” DBS Group Research economist Han Teng Chua said in a report on Friday.
Chua said the Singaporean bank’s 6.5-percent GDP growth forecast for the Philippines—below the government’s 7 to 9 percent target for this year—“incorporated the possibility of speed bumps driven by the virus and sporadic tightening.”
The Omicron surge to record-high infections this month reverted movement restrictions to a stricter alert level 3 in Metro Manila and other areas accounting for over half of the economy, shedding P3 billion in weekly output.
“Risks remain tilted to the downside, should restrictions be prolonged, less targeted, and more stringent,” Chua said.
Chua contrasted the Philippines’ bumpy recovery path to Malaysia’s sustained inroads in economic reopening. “Malaysia continues to progress toward ‘living with COVID-19’ and an endemic environment against a backdrop of relatively manageable infections, likely helped by high vaccinations and the booster rollout, even as the authorities are bracing themselves for another virus wave,” he said.
United Overseas Bank (UOB), another Singaporean lender, said its similar 6.5-percent 2022 growth forecast for the Philippines was “subject to downside risks, particularly from the pandemic, prolonged global supply chain disruptions, moderating global growth momentum, and heighted financial volatility due to tighter global monetary policy stance.”
UOB senior economist Julia Goh and economist Loke Siew Ting noted in their report last week that the Philippines’ vaccination rate, at about 52.3 percent of the population or 57.3 million Filipinos as of Jan. 23, remained far short of the government’s herd immunity goal to inoculate 77 million people.
UOB also pointed to the May 9 elections as another downside risk, as it will “accord primacy to the concerns about policies and reforms of the next President and government.”
Citi’s economist for the Philippines Nalin Chutchotitham said in another report that her 6.8-percent growth projection for 2022 considered that “there could be a wait-and-see period for private investment as businesses await the outcome of the May 2022 election and future policy direction.”
“The recovery is expected to remain supported by continued improvement in employment and expansionary fiscal policy, as well as further reopening. However, downside risks from higher input costs and global economic uncertainties remain,” Chutchotitham said.
Besides election jitters, Barcelona-based FocusEconomics said extreme weather events, fiscal decentralization or the devolution of more functions to local governments given their bigger budgets, as well as upside inflationary pressures pose risks to the Philippines’ economic rebound.
FocusEconomics last week cut its 2022 GDP growth forecast to 6.9 percent from 7 percent previously even as it expects overall economic activity, especially consumer spending, to pick up on the back of increasing vaccination coverage coupled with sustained public infrastructure buildup.