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Economists see strong Philippine GDP growth in Q1

PHILIPPINE DAILY INQUIRER – The Philippine economy likely withstood the Omicron surge at the start of this year and sustained growth during the first quarter – estimated by economists to range from 5.5 per cent to as high as 8.3 per cent year-on-year.

Beyond the possibly strong end-March gross domestic product (GDP) performance, which the government will report on May 12, economists watching the Philippines flagged high debts and a yawning budget deficit, elevated inflation that could temper consumer spending, as well as some excess baggage carried by leading presidential candidates who may win the elections, which could slow down the Philippines’ flight to economic recovery this year.

On Sunday, Socioeconomic Planning Secretary Karl Kendrick Chua said in a statement that the Philippine economy “will return to its pre-pandemic growth this year as the country continues to build on progress in recovering from COVID-19 from the first half of the administration”.

Chua, who heads the state planning agency National Economic and Development Authority (Neda), declined to say if the first-quarter output likely already reverted to pre-COVID-19 levels, pending the official Philippine Statistics Authority (PSA) report.

Of the 18 first-quarter GDP growth forecasts collected by the Inquirer last week, Bank of the Philippine Islands’ Emilio Neri Jr had the highest estimate of 8.3 per cent.

But Neri said the “trade shock and destructive effects of soaring commodity prices on overall demand” – wrought by the invasion of Ukraine – tempered his growth expectation for full-year 2022 to six to 6.5 per cent from seven to 7.5 per cent previously, especially if oil prices remained close to USD100 per barrel.

The government targets seven to nine per cent GDP expansion this year on the back of further economic re-opening by dismantling stringent pandemic restrictions and ramping up mass vaccination. However, most of the economists polled by the Inquirer said actual growth in 2022 would fall below target, to as low as 4.5 per cent, as estimated by Pantheon Macroeconomics’ Miguel Chanco.

Even the most optimistic estimate of 7.5 per cent, by Capital Economics’ Alex Holmes, was nearer the lower end of the growth goal range. “Even our forecast for above-trend growth of 7.5 per cent this year is consistent with the economy being 13-per-cent smaller by the end of this year than if the pandemic had never happened,” the London-based think tank Capital Economics said in a May 6 report.

UnionBank of the Philippines’ Ruben Carlo Asuncion had the least optimistic first-quarter growth forecast of 5.5 per cent year-on-year, but he said that it was “robust enough” given the GDP contraction a year ago when the Philippines’ worst post-war recession extended up to the first quarter of 2021.