ADB sees high inflation lingering until 2023
Reopening more productive sectors would keep the Philippine economy afloat despite external risks, such that the Asian Development Bank (ADB) hiked its 2022 gross domestic product (GDP) growth forecast for its host-country to 6.5 percent.
However, the Manila-based multilateral lender expects high consumer prices to linger until next year and pose downside risk to growth.
The ADB’s Asian Development Outlook (ADO) Supplement report for July 2022 released on Thursday showed a higher GDP growth projection for the Philippines than 6 percent previously. The updated forecast was at the lower end of the Marcos administration’s downscaled 6.5-7.5 percent growth goal for this year.
Across the Asia-Pacific, this year’s ADB growth expectations for the Philippines was among the optimistic, just behind India’s 7.2 percent and matching Vietnam’s.
“The growth forecast for the Philippines is raised for 2022 on a stronger-than-expected first-quarter performance, underpinned by rebounds in investment and household consumption. Wider COVID-19 vaccination coverage and relatively mild health impacts from the Omicron variant allowed the economy to reopen further. Mobility data across several activities, including work and recreation, are now back to prepandemic levels,” the ADB said.
“Large public infrastructure projects are underway, and private sector indicators, such as the PMI (purchasing managers’ index), industrial production and imports continue to expand,” the ADB added.
“The Philippine economy’s growth momentum has accelerated close to its ideal growth path. Strong domestic demand supported by a pick up in employment and remittance inflows, private investment expansion, and large public infrastructure projects will underpin the country’s recovery from the economic impact of the pandemic,” ADB Philippines country director Kelly Bird said.
“The government is expected to sustain public spending on priority infrastructure projects under the ‘Build, Build, Build’ program,” Bird said.
Among these priority projects receiving ADB financing, according to Bird, are the Malolos-Clark Railway project and South Commuter Railway project, both part of the North-South Commuter Railway System that will provide safe, fast, and efficient transportation to link Metro Manila to northern and southern Luzon provinces.
The ADB is also financing the Edsa Greenways project, which aims to improve the pedestrian experience along the main thoroughfare in the capital and the Metro Manila Bridges project, which seeks to help solve traffic congestion in the metropolis, Bird added.
For 2023, the Philippine economy is projected to grow by 6.3 percent, exceeded only by India’s 7.8 percent and Vietnam’s 6.7 percent. The government targets 6.5-8 percent yearly growth starting next year until 2028 to outgrow the pandemic-induced debt spike and narrow the budget deficit.
